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Full text of "Central-station electric service; its commercial development and economic significance as set forth in the public addresses (1897-1914) of Samuel Insull .."

CENTRAL-STATION ELECTRIC SERVICE 




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CENTRAL-STATION 

ELECTRIC SERVICE 



ITS COMMERCIAL DEVELOPMENT AND 

ECONOMIC SIGNIFICANCE AS SET FORTH IN 

THE PUBLIC ADDRESSES (l897~1914) OF 

SAMUEL INSULL 

FELLOW OF THE AMERICAN INSTITUTE 
OF ELECTRICAL ENGINEERS, MEMBER OF THK 
(BRITISH) INSTITUTION OF ELECTRICAL ENGINEERS, 
MEMBER OF THE FRANKLIN INSTITUTE, PAST-PRESIDENT OF 
THE NATIONAL ELECTRIC LIGHT ASSOCIATION, PAST- 
PRESIDENT OF THE ASSOCIATION OF EDISON 
ILLUMINATING COMPANIES, ETC. 



EDITED, WITH AN INTRODUCTION, BY 

WILLIAM EUGENE KEILY 



ASSOCIATE OF THB AMERICAN INSTITUTE 
OF ELECTRICAL ENGINEERS, ETC. 



ILLUSTRATED 



CHICAGO 

PRIVATELY PRINTED 
1915 



One thousand one hundred and 
twenty copies of this book have 
been printed for private circulation. 

This copy is No. 

and is presented by Mr. Insull to 



COPYRIGHT, 1915, BY SAMUEL INSULL, 



TO 
MY MOTHER 

IN GRATEFUL RECOGNITION OF 

HER AFFECTIONATE AND 
SYMPATHETIC ENCOURAGEMENT 

S. I. 



CONTENTS 

Page 

FOREWORD xv 

EDITOR'S INTRODUCTION xvii 

EARLY WORK WITH EDISON xxv 

AN INTIMATE PERSONAL OPINION OF THE PROSPECTS OF 
THE ELECTRIC LIGHT IN 1881 FROM EDISON'S YOUTH- 
FUL PRIVATE SECRETARY xxxv 

ADDRESSES OF SAMUEL INSULL 

PROBLEMS OF THE EDISON CENTRAL-STATION COM- 
PANIES IN 1897 1 

THE DEVELOPMENT OF THE CENTRAL STATION ... 8 

STANDARDIZATION, COST SYSTEM OF RATES, AND PUBLIC 
CONTROL 34 

POSSIBILITIES OF THE CENTRAL-STATION BUSINESS . . 48 

ELUCIDATION OF ELECTRIC-SERVICE RATES FOR BUSINESS 
MEN 54 

CITY CLUB DISCUSSION OF THE 21,000-KiLowATT CON- 
TRACT WITH THE CHICAGO CITY RAILWAY COMPANY 65 

THE LARGER ASPECTS OF MAKING AND SELLING ELEC- 
TRICAL ENERGY 73 

PRODUCTION AND SALE OF ELECTRICAL ENERGY IN 
CHICAGO 97 

THIRTY YEARS OF ELECTRICAL DEVELOPMENT 1879- 
1909 103 

"SELL YOUR PRODUCT AT A PRICE WHICH WILL ENABLE 
You TO GET A MONOPOLY" 116 

THE OBLIGATIONS OF MONOPOLY MUST BE ACCEPTED . 118 

PRESENTATION OF THE EDISON MEDAL TO ELIHU THOM- 
SON 123 

vii 



viii CONTENTS 

MASSING OF ENERGY PRODUCTION AN ECONOMIC NECES- 
SITY 127 

TWENTY-FIVE YEARS OF CENTRAL-STATION COMMERCIAL 

DEVELOPMENT 144 

EMPLOYEES URGED TO STUDY ECONOMIC QUESTIONS. . 158 
SELLING OF ELECTRICITY IN LONDON AND CHICAGO COM- 
PARED 167 

"SATISFY YOUR CUSTOMERS" 174 

RELATIONS OF THE PUBLIC TO THE PUBLIC-SERVICE 

CORPORATIONS 182 

VALUE OF COMPANY-SECTION ORGANIZATION IN THE 
NATIONAL ELECTRIC LIGHT ASSOCIATION .... 189 

THE FINAL TEST OF WELFARE WORK 193 

THE NECESSITY OF THE APPRAISAL OF PUBLIC-UTILITY 

PROPERTIES 197 

CANADIAN ELECTRIC-SERVICE PROBLEMS DISCUSSED ON 

CORONATION DAY 199 

DUPLICATION OF PRODUCTION is ECONOMIC WASTE . . 206 
DINNER IN HONOR OF MESSRS. S. Z. DE FERRANTI, C. H. 
MERZ, AND ARTHUR WRIGHT, OF LONDON. . . .215 

OPPORTUNITY FOR ADVANCEMENT 234 

CAREERS OF Two ELECTRICAL MEN 241 

A CERTAIN HOSTILITY TO PUBLIC-SERVICE CORPORATIONS 243 

THE NAME OF EDISON A TALISMAN 249 

THE RELATION OF CENTRAL-STATION GENERATION TO 

RAILROAD ELECTRIFICATION 255 

DISCUSSION FOLLOWING THE ADDRESS ON " THE RELATION 
OF CENTRAL-STATION GENERATION TO RAILROAD 

ELECTRIFICATION" 308 

A QUARTER-CENTURY CENTRAL-STATION ANNIVERSARY 

CELEBRATION IN CHICAGO 316 

SUPPLYING THE ENERGY REQUIREMENTS OF THE COM- 
MUNITY 338 

STEPPING STONES OF CENTRAL-STATION DEVELOPMENT 

THROUGH THREE DECADES 342 

THE PRODUCTION AND DISTRIBUTION OF ENERGY . . .357 
INFLUENCE OF ENGINEERING ON MODERN CIVILIZATION 392 



CONTENTS ix 

Page 

POSSIBILITIES OF UNIFIED ELECTRICITY SUPPLY IN THE 

STATE OF ILLINOIS 399 

BROAD QUESTIONS OF PUBLIC POLICY 405 

PRESENT AND FUTURE DISTRIBUTION OF ELECTRICAL 

ENERGY 414 

ELECTRICAL SECURITIES 427 

CENTRALIZATION OF ENERGY SUPPLY 445 

INDEX . 477 



ILLUSTRATIONS 

Page 

PORTRAIT OF THOMAS A. EDISON Frontispiece 

FACSIMILE PAGES (REDUCED) OF LETTER TO MR. KINGSBURY Facing xxxvi 

FISK STREET GENERATING STATION, CHICAGO Facing 54 

DIAGRAM SHOWING DECREASE IN COST OF ELECTRIC LIGHT ... 56 

DIAGRAM OF TOTAL-OUTPUT LOAD CURVES, SHOWING PEAK ... 56 

DIAGRAM SHOWING RELATIVE COST OF ELECTRIC-LIGHTING SUPPLY . 59 

VERTICAL TURBO-GENERATORS IN FISK STREET STATION . Facing 74 

DIAGRAM GIVING ANALYSIS OF COST OF PRODUCTION 77 

DIAGRAM OF RAILWAY RATE AT DIFFERENT LOAD FACTORS ... 80 

DIAGRAM OF MONTHLY LOAD FACTORS 82 

DIAGRAM OF ANNUAL LOAD FACTORS, CHICAGO, 1909 83 

DIAGRAM STUDY OF DIVERSITY OF DEMAND 86 

DIAGRAM ACTUAL CONDITIONS OF DIVERSITY 88 

DIAGRAM OF VARIATION IN MAXIMA 89 

QUARRY STREET GENERATING STATION, CHICAGO .... Facing 104 

DIAGRAM OF CHICAGO DIVERSITY FACTOR, 1909-1910 131 

DIAGRAM SHOWING POSSIBILITIES OF CHICAGO ELECTRIC SERVICE, 

1909 133 

BOILER ROOM IN QUARRY STREET STATION Facing 148 

TURBO-GENERATOR ROOM IN QUARRY STREET STATION . . Facing 162 
DINNER IN HONOR OF MESSRS. S. Z. DE FERRANTI, C. H. MERZ, AND 

ARTHUR WRIGHT Facing 215 

GROUNDS OF THE NORTHWEST GENERATING STATION, CHICAGO Facing 236 

BOILER ROOM AT NORTHWEST STATION Facing 244 

DIAGRAM OF NEW YORK TOTAL LOAD 260 

DIAGRAM OF NEW YORK LIGHT-AND-POWER LOAD 261 

DIAGRAM OF NEW YORK RAILWAY LOAD 262 

DIAGRAM OF NEW YORK RAILROAD LOAD 263 

DIAGRAM OF BOSTON TOTAL LOAD 265 

DIAGRAM OF CHICAGO TOTAL LOAD 267 

DIAGRAM OF CHICAGO RAILWAY LOAD 270 

DIAGRAM OF ASSUMED CHICAGO RAILROAD LOAD 271 

DIAGRAM OF CHICAGO ANNUAL LOAD FACTORS, 1912 272 

MAP OF NEW YORK POWER-TRANSMISSION SYSTEMS 274 

MAP OF NEW YORK SYSTEMS IF UNIFIED 275 

DIAGRAM OF CHICAGO DAILY LOAD FACTORS 276 

xi 



xii ILLUSTRATIONS 

Page 

DIAGRAM OF BOSTON DAILY LOAD FACTORS 278 

DIAGRAM COMPARING CHICAGO AND NEW YORK LOAD CURVES . . 280 

DIAGRAM COMPARING CHICAGO AND BOSTON LOAD CURVES . . . 282 

MAP OF CHICAGO RAILROAD TERMINALS 283 

MAP OF CHICAGO TERMINALS ELECTRIFIED BY GROUPS 284 

MAP OF CHICAGO TERMINALS ELECTRIFIED FROM ONE SOURCE . . 285 
DIAGRAM OF CHICAGO FREIGHT AND SWITCHING REQUIREMENTS FOR 

A MONTH 286 

DIAGRAM OF CHICAGO FREIGHT REQUIREMENTS FOR A YEAR . . . 287 

DIAGRAM OF CHICAGO PASSENGER REQUIREMENTS FOR A MONTH . . 288 

DIAGRAM OF CHICAGO PASSENGER REQUIREMENTS FOR A YEAR . . 289 

DIAGRAM SHOWING COLD- WEATHER REQUIREMENTS 289 

DIAGRAM SHOWING MONTHLY VARIATION IN REQUIREMENTS . . . 290 

DIAGRAM ILLUSTRATING SWING MAXIMUM 290 

FACSIMILE (REDUCED) OF TELEGRAM FROM MR. EDISON .... 317 

EDISON LABORATORY AT MENLO PARK Facing 318 

EDISON HEADQUARTERS IN NEW YORK IN 1881 .... Facing 318 

EARLY CENTRAL STATION IN MILAN Facing 318 

EDISON MACHINE WORKS IN NEW YORK, 1881 .... Facing 318 

INCANDESCENT LAMP OF 1882 Facing 318 

EARLY TYPE OF ELECTRIC-LIGHTING FIXTURE .... Facing 318 

EARLY EDISON DYNAMOS Facing 319 

APPLETON (Wis.) CENTRAL STATION OF 1882 Facing 319 

INTERIOR OF PEARL STREET STATION, NEW YORK, IN 1882 Facing 319 

ORIGINAL EDISON BUILDING, ADAMS STREET, CHICAGO . . Facing 320 

ORIGINAL THREE- WIRE SWITCHBOARD IN ADAMS STREET STATION Facing 320 

DYNAMO ROOM IN ADAMS STREET STATION 320B 

ENGINE ROOM IN ADAMS STREET STATION 320B 

HARRISON STREET STATION, CHICAGO 320C 

INTERIOR OF HARRISON STREET STATION 320C 

SWITCHBOARD IN ADAMS STREET STATION Facing 321 

TWENTY-SEVENTH STREET STATION, CHICAGO Facing 321 

NORTH CLARK STREET STATION, CHICAGO Facing 321 

INTERIOR OF NORTH CLARK STREET STATION Facing 321 

ROTARY CONVERTERS OF 1897 Facing 321 

DIAGRAM OF CHICAGO CENTRAL-STATION BUSINESS, 1888-1900 . . . 322 

RELATIVE SIZE AND OUTPUT OF GENERATING UNITS 323 

DIAGRAM OF MAXIMUM-KILOWATT OUTPUT, CHICAGO 323 

DIAGRAM OF CHICAGO CENTRAL-STATION BUSINESS, 1898-1911 . . . 325 

DIAGRAM OF LIGHTING RATES FOR VARIOUS HOURS' USE .... 326 

CHART SHOWING GRAPHICALLY REDUCTION IN COST OF ELECTRICITY 327 
FACSIMILE BILLS (REDUCED) FOR SAME AMOUNT OF ENERGY IN 1892 

AND 1912 327 

GRAPHICAL REPRESENTATION OF CHICAGO CENTRAL-STATION GROWTH 328 



ILLUSTRATIONS xiii 

Page 

DIAGRAM SHOWING DISTRIBUTION OF EARNINGS 329 

DIAGRAMMATIC REPRESENTATION OF RELATIVE INCOMES OF CHICAGO 

PUBLIC-SERVICE COMPANIES 329 

EDISON ELECTRIC RAILWAY, MENLO PARK, 1882 .... Facing 330 

ELECTRIC LOCOMOTIVE OF 1912 Facing 330 

FIRST STORAGE BATTERY AT ADAMS STREET STATION . . Facing 331 

ORIGINAL FISK STREET TURBO-GENERATOR Facing 331 

NORTHWEST STATION AS PLANNED IN 1910 Facing 331 

VERTICAL 20,000-KiLOWATT TURBO-GENERATORS IN NORTHWEST 

STATION Facing 338 

TYPICAL SUBSTATIONS IN CHICAGO Facing 354 

MAP OF LAKE COUNTY, ILL., IN 1910 359 

MAP OF LAKE COUNTY IN 1912 360 

SKETCH MAP OF RURAL DISTRIBUTION SYSTEM 360 

DIAGRAM SHOWING USE OF ELECTRICITY ON FARMS 361 

DIAGRAM OF TYPICAL FARM LOADS 362 

DIAGRAM SHOWING BENEFIT OF UNIFIED CONTROL 364 

DIAGRAM OF LIGHT-AND-POWER LOADS IN ILLINOIS 367 

DIAGRAM OF RAILWAY LOADS IN ILLINOIS 368 

DIAGRAM OF WATER-PUMPING LOADS 369 

DIAGRAM OF ICE-MAKING LOADS 370 

MAP OF ILLINOIS RIVER DRAINAGE DISTRICTS 371 

MAP (DETAIL) OF DRAINAGE DISTRICTS 372 

DIAGRAM OF DRAINAGE-DISTRICT CHARACTERISTICS 373 

DIAGRAM OF ESTIMATED LOAD FOR DRAINAGE 374 

DIAGRAM OF ESTIMATED COAL-MINING LOAD IN ILLINOIS .... 375 

DIAGRAM OF ESTIMATED RURAL LIGHT-AND-POWER LOAD IN ILLINOIS 376 

DIAGRAM OF TOTAL ELECTRICAL REQUIREMENTS OF ILLINOIS . . . 378 

DIAGRAM OF ILLINOIS TOTAL LOAD, UTILIZING DIVERSITY .... 379 

MAP OF ILLINOIS SHOWING TOWNS WITHOUT ELECTRIC SERVICE . . 385 
MAP OF ILLINOIS SHOWING TOWNS WITH ELECTRIC SERVICE UNDER 

LOCAL MANAGEMENT 386 

MAP OF ILLINOIS SHOWING TOWNS WITH ELECTRIC SERVICE UNDER 

GROUP MANAGEMENT 387 

DIAGRAM ELECTRIC-SERVICE CONDITIONS IN ILLINOIS 388 

INTERIOR OF SEDGWICK STREET SUBSTATION, CHICAGO . . Facing 394 
A BOILER ROOM IN THE 1914 EXTENSION TO FISK STREET 

STATION Facing 402 

VIEW IN FISK STREET STATION, SHOWING HORIZONTAL TURBO- 
GENERATORS Facing 420 

DIAGRAM SHOWING ANNUAL SALES OF ELECTRICITY IN CHICAGO . . 429 

DIAGRAM OF KILOWATT-HOURS PRODUCED AND SOLD IN CHICAGO . 430 

DIAGRAM OF INCOME PER KILOWATT-HOUR SOLD 430 

DIAGRAM SHOWING AMOUNT OF ELECTRIC LIGHT ONE DOLLAR WOULD BUY 431 



xiv ILLUSTRATIONS 

Page 
DIAGRAM GIVING COMPARISON OF LIGHTING RATES IN VARIOUS 

CITIES 433 

DIAGRAM SHOWING SOURCE OF CAPITAL FOR ADDITIONS TO PLANT . 435 
DIAGRAM SHOWING INCOME AND INVESTMENT PER CUSTOMER . . . 436 
DIAGRAM SHOWING RELATION OF COST TO INCOME IN CHICAGO . . 437 
DIAGRAM OF CHICAGO BLOCK OF APARTMENTS, ILLUSTRATING DIVER- 
SITY FACTOR 448 

DIAGRAM SHOWING DIVERSITY FACTOR OF LARGE CUSTOMERS . . . 450 
TYPICAL MAXIMUM-LOAD DIAGRAM OF DEPARTMENT STORES . . .451 

TYPICAL MAXIMUM-LOAD DIAGRAM OF PUBLIC GARAGES .... 452 

TYPICAL MAXIMUM-LOAD DIAGRAM OF OFFICE BUILDINGS .... 453 
TYPICAL MAXIMUM-LOAD DIAGRAM OF STEEL, IRON, AND BRASS 

WORKS 454 

TYPICAL MAXIMUM-LOAD DIAGRAM OF MISCELLANEOUS MANUFACTURERS 455 
TYPICAL MAXIMUM-LOAD DIAGRAM OF STOCKYARDS AND PACKING 

INDUSTRIES 456 

TYPICAL MAXIMUM-LOAD DIAGRAM OF TELEPHONE EXCHANGES . . 456 
TYPICAL MAXIMUM-LOAD DIAGRAM OF ICE MANUFACTURERS . . .457 

TYPICAL MAXIMUM-LOAD DIAGRAM OF HOTELS 458 

TYPICAL MAXIMUM-LOAD DIAGRAM OF BRICKYARDS AND QUARRIES . 458 

TYPICAL MAXIMUM- LOAD DIAGRAM OF CEMENT WORKS, ETC. . . . 459 

DIAGRAM SHOWING RELATION OF INCOME TO OUTPUT 461 

DIAGRAM OF INCOME AND OUTPUT (CENSUS) 462 

DIAGRAM SHOWING RATIO OF MOTOR LOAD TO TOTAL LOAD . . . 465 

DIAGRAM SHOWING DISPOSITION OF INCOME 466 

DIAGRAM SHOWING RELATION OF INVESTMENT TO OUTPUT .... 467 

DIAGRAM OF PER CAPITA SALES 468 

DIAGRAM SHOWING CONSERVATION OF COAL 469 

FINANCIAL CHART OF COMMONWEALTH EDISON COMPANY .... 470 

MAP ILLUSTRATING GROUP OPERATION OF UTILITIES IN ILLINOIS . 472 



FOEEWORD 

Some of the addresses given on the following pages have 
been printed in pamphlet form. Several months ago, when the 
question arose of reprinting such of these as were out of print, 
I decided to go a step farther and to print in a book, for 
private circulation, a collection of speeches that I have deliv- 
ered on subjects bearing on Central-Station Electric Service. 
The present volume is the result of that determination. It 
is my hope that some of the material in these addresses is 
worthy of preservation in a permanent record, and that the 
studies which I have made in connection with my own work 
hi the conduct of central-station enterprises may, if placed 
at the disposal of students and younger men coming into the 
industry, help these future managers and executives to solve 
the many problems with which they will have to deal. I also 
venture to express the belief that some of the addresses may 
be of use to the future historians of the industry, my connec- 
tion with which I cherish with what I trust will be considered a 
pardonable pride. 

The careful reader may find some divergences of opinion 
in the text of this volume. It should be borne in mind that 
the industry is the development of but a few years, relatively, 
and that to a large extent those engaged in it, certainly on the 
commercial side, have had to blaze their own trails. Thus, if 
different statements in my addresses appear contradictory, 
the cause may be found in the changes of opinion which 
greater experience often brings. 

It has been my good fortune to be associated with the central- 
station industry for more than a generation, Sunday of this week 
being the thirty-fourth anniversary of my arrival in New 
York from England and of my entering the service, as private 

xv 



xvi FOREWORD 

secretary, of the father of the industry, Mr. Thomas A. Edison, 
then about to begin the installation of the first central station, 
in New York. Those who take the trouble to read the follow- 
ing chapters will find that the name of Edison occurs quite 
frequently. I have no apology to make for that fact. For 
thirty-six years during my entire career in this country and 
for two years in London in connection with Mr. Edison's Euro- 
pean business it has been my privilege to serve under the 
banner bearing his name. For eleven years from March, 
1881, to June, 1892 I had the great advantage of intimate 
personal association with, and teaching and advice from, the 
great inventor whose name must for all time be associated 
with the central-station industry, which is one of the many 
monuments to his genius, resourcefulness and unrivaled capa- 
city for work. These remarks may explain why I deem it a 
privilege to present as the frontispiece of this volume a repro- 
duction of my favorite photograph of Mr. Edison as a slight 
indication of my affectionate esteem for the man. 

The literary and mechanical supervision of the book has 
been entrusted to my friend Mr. William Eugene Keily, an 
experienced writer on electrical subjects, who for many years 
has evinced a sympathetic interest in the ideas advanced in 
these addresses. I provided Mr. Keily with copies of all of the 
addresses that I had delivered and of which the text was avail- 
able, and asked him to select from those placed at his disposal 
such as he deemed suitable to include in this volume. It is 
proper that mention should be made also of the assistance I 
have received from the engineering and statistical staff of the 
Commonwealth Edison Company in preparing the data and 
and curves used by me in my various addresses. 

SAMUEL INSULL. 

Chicago, March 6, 1915. 



EDITOR'S INTRODUCTION 

As one who has had something to do with the journalistic 
work connected with the development of the art and the in- 
dustry which have been based on the science of electricity, it has 
been a great pleasure to me to prepare for the press the present 
collection of the public utterances of Samuel Insull. Quite 
apart from any interest which may attach to the personality 
of the man, this book should serve a useful purpose. It should 
have a value a unique value, I think as presenting in con- 
venient form dissertations on the modern concept of the eco- 
nomics of central-station electric service, not by one who has 
only a theoretical knowledge of the subject, or a mere academic 
interest in it, but by one who has been intimately concerned 
in the expansion of the electrical industry for thirty-four years, 
and thus almost from its very beginning, and who for twenty- 
three years has stood in the first rank of operators of electric 
central-station properties. The work should have a practical 
value, therefore, to those who would learn of this important 
subject from one who can speak as the result of first-hand 
experience and study under actual conditions. Where else is 
to be found such a mass of practical operating data, such de- 
ductions and exhortations, such pleadings for the pure gospel 
of making and selling electricity on sound economic principles? 
Where else is available a series of papers like these from a man 
whose record makes him free of the right to speak to other elec- 
trical men? Nowhere else is there an undertaking of this pre- 
cise character. And so, I believe, the book is intrinsically 
worth the making. 

Obviously it would be out of place in a book having the 
genesis of this one to attempt an analysis of the qualifications of 
the author of these addresses. But there is no impropriety in 

xvii 



xviii EDITOR'S INTRODUCTION 

considering for a moment the place of the enterpriser the 
entrepreneur of many economists in public-utility work. 
What are the functions of an enterpriser? This question may 
be answered, perhaps, by quoting Mr. Halford Erickson, a 
member of the Railroad Commission of Wisconsin. Before a 
gathering of electrical men in June, 1914, Mr. Erickson read a 
carefully reasoned paper on "Regulation and Reasonable Re- 
turns." In the course of it the author expressed himself as 
follows : 

Business is now largely carried on by enterprisers on bor- 
rowed capital on which interest is paid. * * * This con- 
dition has led to the separation of the functions of the capitalist 
and the enterpriser or employer and to a more complete 
analysis of the compensation that each of these factors 
receives. * * * The two functions are, in fact, often com- 
bined. * * * Profits have their source in the business ability, 
skill and foresight of the enterprisers, or in their management. 
The enterpriser is a sort of an economic buffer who bears the 
shock and often much of the loss in case of failure and who also 
reaps the credit and much of the profit in case of success. To 
successfully exercise the functions of an enterpriser a high order 
of ability is required. Such a man must have organizing 
capacity of a high order, be a good judge of men and have tact 
in dealing with them. He must have the command of financial 
resources and the ability to plan and execute commercial and 
industrial policies. He should also have the technical knowl- 
edge that is required to adopt the best methods, outline the 
most economical processes and to properly pass upon the mate- 
rials and products. * * * The wages of management must 
be high enough to encourage men of the necessary ability and 
skill to enter the field. * * * The risks involved vary in 
their nature with variations in the character of the business. 
* * * They are always present, however, and must be 
assumed by every enterpriser. * * * In the long run the 
compensation for risks will not fall below the point at which a 
sufficient number of enterprisers are found who are willing to 
assume it. 

The addresses which are collected in this book are the work 
of an enterpriser who has led the way to new conceptions of the 
economic function of central-station electric service. The great 
doctrines of concentrating facilities of production and trans- 



EDITOR'S INTRODUCTION xix 

mission, to reduce the community cost of making electricity ; of 
utilizing the factor of diversity in demand incident to the vary- 
ing electrical needs of a whole community or of a number of 
communities in a given area; of standing firm for monopoly 
in electric service (but a monopoly regulated by the state) 
that these economic benefits may be obtained; of reducing 
rates to small customers as well as large ones as fast as the 
economies effected in making and selling electricity will permit; 
of retaining a reasonable profit, but no more than a reasonable 
profit, for private ownership, because by private ownership 
alone, so far as experience has shown up to the present time, 
can these economies be effected; of being perfectly frank and 
open with the public and the public's representatives; of 
recognizing that the faithful and continued service of em- 
ployees is entitled to more than a daily wage for daily work and 
providing such reserve accumulation that no deserving em- 
ployee need fear want in his declining years these are some of 
the principles laid down in the speeches gathered in this volume. 
Truly, the electric central-station industry has made great 
progress since the days of a pioneering that was characterized 
alike by the fine enthusiasms and the raw crudities of youth. 
It has, to a great extent, as we may believe, found itself; it 
knows more about itself, of the cost of producing its product 
and of how to sell it; it has passed from the time when electric 
lighting was its principal concern to an era of electric service, 
when the proportion of its energy used for lighting is becoming 
constantly smaller. 

But there is a still more important aspect of the economics 
of electric service. What, for instance, is the position of this 
industry with respect to the Zeitgeist the spirit of the 
times? Is it responsive to the desire that the conditions of 
living may be ameliorated for all human beings as far as things 
from without can modify those conditions? Do the men 
representative of this particular manner of money-making 
recognize that in our queer social complexities unselfishness 
must be blended with selfishness to make a business successful? 
Or, if an antithesis may be allowed, do they realize that elec- 



xx EDITOR'S INTRODUCTION 

tricity is made for man and not man for electricity? In the 
judgment of the present writer a careful reading of the col- 
lected papers in this book will incline one to the belief that the 
above questions, broadly interpreted, must be answered in a 
manner to indicate that the representative electrical enter- 
priser, considered not only as an individual but also as a type, 
may be regarded as a man with a conscience. Perhaps it is 
not fanciful to say that through these speeches, but probably 
not in all cases as the result of premeditation, "one increasing 
purpose runs," and that that purpose is not alone the improve- 
ment of the electric-service industry but also the betterment 
in many ways of those served. This purpose is set forth, for 
example, in the last paragraph of the Association Island address 
on "Present and Future Distribution of Electrical Energy." 
The author says in that place that one likes to feel that he is 
"contributing something to the progress of the country in which 
he lives and of the people among whom he has his abiding place." 
Elsewhere he tells more fully of his conception of cheap elec- 
trical energy in every hamlet and of what it will mean to many 
toilers. One cannot relinquish this exploration of the deeper 
meanings of the book without voicing the reflection that if it is 
true that the man who causes two blades of grass to grow where 
one grew before is a benefactor of the race, then the man who 
effects a combination by which one watt of electrical energy 
serves the purpose of two is, in a sense, hardly less so. 

Much information of historical value, some of it never 
before published, is scattered through the chapters of this book. 
Mr. Insull came to this country from London, his native city, 
in 1881, when he was twenty-one years old, to be private sec- 
retary to Thomas A. Edison. From that day to this he has been 
connected with electrical enterprises. His opportunities for 
gaining familiarity with all the various forms of electrical un- 
dertakings have been exceptional. His deep admiration for 
his old chief, Edison, has never abated, and some evidence of 
this loyalty is shown in nearly every chapter of the present 
volume. The future historian of that electrical development 
which was the marvel of the last quarter of the nineteenth 



EDITOR'S INTRODUCTION xxi 

century and has become the necessity of the first quarter of the 
twentieth will surely find much that is illuminating in the fol- 
lowing pages. 

Originality and boldness are found in these addresses, but 
perhaps the dominant note is that of enthusiasm. The author 
is always sounding the charge, never the retreat; the papers are 
intensely alive, vibrant with the joy of achievement. "It is a 
very great pleasure to me to look back over the last thirty 
years," says the speaker in "Thirty Years of Electrical De- 
velopment." This sturdy note of optimism is, or at least has 
been, characteristic of the industry as a whole. And the 
speeches are not without vivacity, frankness, the vivid touch. 
There is dramatic interest, surely, in the colloquy with the 
public-service commissioner in the Briarcliff speech on "The 
Larger Aspects of Making and Selling Electrical Energy." 
Nor is the element of humor neglected, as may be seen by the 
story in the Brooklyn address of the sleepy young chap of the 
early eighties watching the galvanometer at night during 
cable-testing on the street and being wakened by the night- 
stick of a friendly policeman when the "boss" came around. 
In the same chapter that on " Stepping Stones of Central- 
Station Development through Three Decades" there is an 
anecdote of Edison's rough-and-ready method of testing his 
three-wire-distribution idea that is of real human interest. 
Other stories and touches of byplay add variety to the pages, 
while in some passages intensity and earnestness may fairly be 
said to attain the dignity of eloquence. 

Young men engaged in central-station work will find many 
words of encouragement in these addresses. The advice given 
is not altogether of the hackneyed sort. It gives the impression 
of sincerity and good feeling. Thus, addressing the employees 
of his own company ("A Quarter-Century Central-Station 
Anniversary Celebration in Chicago"), the speaker said: 
"There is one thing, in my twenty years of managing this busi- 
ness, that I am more proud of than anything else, and that is 
that I have been able to develop it with the assistance of the 
brains within the business." The genuine, sympathetic touch 



xxii EDITOR'S INTRODUCTION 

here is unmistakable. And the message of hope is not given 
merely to build up one organization, for, farther on, we are 
told that "There isn't any reason why this Mississippi Valley, 
the richest part of the United States in productive ability, 
should not obtain the greater part of its men for the management 
of the great energy-producing companies that must be estab- 
lished throughout the Valley in the next fifty years from the 
boys who are now entering the service of the Commonwealth 
Edison Company." 

One thing to be borne in mind in considering these speeches 
is that they were nearly all extemporaneous. They are not, as 
a rule, the carefully worded productions of secluded care, but 
the talks of a busy man of affairs, founded, of course, on study 
and experience, but depending for the immediate spoken word 
on the mental resources of a man on his feet and facing an 
audience. In many cases the speaker based his remarks on 
diagrams, curves or tables, prepared under his direction by 
assistants and exhibited to the assemblage. Responding to 
numerous requests for addresses from different organizations 
and from different cities, Mr. Insull spoke on the same general 
subjects on a number of occasions. To avoid duplication the 
editor has condensed some of the addresses where the repetition 
was obvious. But where, as was the case in a few instances, 
new matter was interwoven with what had been given, in sub- 
stance, before, the plan has been to retain the whole rather than 
to reject it or to attempt to "unscramble" the new from the old. 
Nevertheless, the amount of duplication in the present volume 
is not great. 

Perhaps a few words about the terminology of the electrical 
art may be permitted. During the period covered by these ad- 
dresses there has been improvement in the manner of speaking 
and writing about electrical things. Thus, "electric current" 
has been restored to its proper scientific meaning, being now 
rarely used to designate "electrical energy," of which it is only 
one component. With more careful study we have come to use 
the words "force," "power" and "energy" with greater pre- 
cision in electrical work. We differentiate more clearly at the 



EDITOR'S INTRODUCTION xxiii 

present time between "transmit" and "distribute." We are 
more apt to speak of "generator" than "dynamo" (although 
there seems to be little reason for this change, for "dynamo- 
electric machine" has a respectable lineage), and of "generating 
station" rather than "power house." The words "trans- 
former" and "converter," once synonymous, designate radically 
different types of apparatus today, and "storage battery" has 
prevailed over "accumulator," once the more usual appellation. 
"Power factor" and "load factor" have been more clearly 
defined, and "diversity factor" has come into being with the 
development of the art. But there is still some confusion in 
the nomenclature, as, to take a familiar example, in the use of 
the qualifying words "electric" and "electrical." Apparently, 
the tendency is to assign to the former the status of a specific 
qualitative, as in "electric motor" and "electric railway," 
and to the latter that of a general qualitative, as in "electrical 
engineering" and "electrical phenomena." However, this 
distinction is not always observed. Those who are curious in 
such matters may notice, possibly, some discrepancy in the use 
of electrical terms in the earlier and later addresses presented in 
this work. The editor has felt free to alter phraseology in the 
interest of clearness, but not when such re-phrasing would 
replace the idiom of other days in such a manner as to obliterate 
racy characteristics of value. 

Forty speeches and papers are given in this volume, follow- 
ing some preliminary matter relating to the early days of cen- 
tral-station history. The date of the first one is September 14, 
1897, and of the last April 20, 1914. Over half were delivered 
in Chicago, nine in or very near New York, and the remainder 
in other places in the United States. The list does not include 
all of Mr. Insult's addresses, and several have been delivered 
since the last of those printed here. It will be noticed that 
after one address in 1897 and two in 1898 there was none for 
nearly ten years. It was in this period, it may be conceived, 
that the larger aspects of the business of supplying electrical 
energy were shaping themselves in the mind of the originator of 
these contributions to the development of the industry. It 



xxiv EDITOR'S INTRODUCTION 

was a learning period a period of awakening. The papers 
show growth, expansion, broadening; and yet the very earliest 
is strikingly modern when re-read today. But, after all, this 
first essay goes back only eighteen years, while the central- 
station industry is thirty-three years old. The development 
of the industry, therefore, would seem to be logical and to 
rest on foundations broad and secure. 

The editor desires to express his cordial thanks, for en- 
couragement and assistance, to his friends, Mr. W. D. Weaver, 
of Charlottesville, Virginia, and Messrs. Edward Caldwell and 
T. Commerford Martin, of New York. Finally, he wishes 
to avow responsibility for all statements, whether of fact or 
comment, appearing in the notes inserted in the text. 

WILLIAM EUGENE KEILY. 

Chicago, March, 1915. 



EARLY WORK WITH EDISON 

As has been noted on preceding pages, Mr. Insull obtained 
his start in the electrical industry as secretarial assistant and 
man of affairs for Thomas A. Edison. He conceived a warm 
friendship and a deep admiration for the famous inventor. 
Some expression to these sentiments is given, often in Mr. 
InsulPs own language, in the biography "Edison His Life 
and Inventions," written by Messrs. Frank Lewis Dyer and 
Thomas Commerford Martin, and published and copyrighted 
in 1910 by Harper & Brothers. By permission, the extracts 
which make up this chapter are reprinted from this work, to 
which the citations refer. 

WHEN THE TELEPHONE WAS A CURIOSITY 

Mr. Samuel Insull, who afterward became private secre- 
tary to Mr. Edison, and a leader in the development of Ameri- 
can electrical manufacturing and the central-station art, was 
also in close touch with the London situation thus depicted, 1 
being at the time private secretary to Colonel Gouraud, and 
acting for the first half -hour as the amateur telephone operator 
in the first experimental exchange erected in Europe. He took 
notes of an early meeting where the affairs of the company were 
discussed by leading men like Sir John Lubbock (Lord Avebury) 
and the Right Hon. E. P. Bouverie (then a cabinet minister), 
none of whom could see in the telephone much more than an 
auxiliary for getting out promptly in the next morning's papers 
the midnight debates in Parliament. "I remember another 
incident/* says Mr. Insull. "It was at some celebration of one 

1. Vol. I, chap, ix, page 192. The "London situation" grew out of the 
introduction of Edison's telephone in England in or about the year 1879. 

XXV 



xxvi EARLY WORK WITH EDISON 

of the royal societies at the Burlington House, Piccadilly. 
We had a telephone line running across the roofs to the base- 
ment of the building. I think it was to TyndalPs laboratory in 
Burlington Street. As the ladies and gentlemen came through, 
they naturally wanted to look at the great curiosity, the loud- 
speaking telephone; in fact, any telephone was a curiosity then. 
Mr. and Mrs. Gladstone came through. I was handling the 
telephone at the Burlington House end. Mrs. Gladstone asked 
the man over the telephone whether he knew if a man or woman 
was speaking; and the reply came in quite loud tones that it 
was a man!" 

LOOKING AFTER THE PAY-ROLLS 

In addition 1 there must be included Mr. Samuel Insull, 
whose activities for many years as private secretary and 
financial manager were devoted solely to Mr. Edison's inter- 
ests, with Menlo Park as a center and main source of anxiety 
as to pay-rolls and other constantly recurring obligations. 

YOUNG INSULL PASSES UNDER THE SPELL OF EDISON AT THEIR 
FIRST INTERVIEW 

These preparations 2 overlap the reinforcement of the staff 
with some notable additions, chief among them being Mr. 
Samuel Insull, whose interesting narrative of events fits ad- 
mirably into the story at this stage, and gives a vivid idea 
of the intense activity and excitement with which the whole 
atmosphere around Edison was then surcharged: "I first met 
Edison on March 1, 1881. 3 I arrived in New York on the 
City of Chester about five or six in the evening and went direct 

1. Vol. I, chap, xii, page 274. This refers to the latter half of the 
Menlo Park period of 1876-1886. 

2. Vol. I, chap, xiv, page 328. The preparations were for the Paris 
Exposition of 1881. 

3. A recent examination of a letter written by Mr. Insull to his mother at 
the time shows that this date should be February 28, 1881, one day earlier than 
the date of the text. It follows that the "March 2d" of page xxviii of this 
book should be " March 1st." 



EARLY WORK WITH EDISON xxvii 

to 65 Fifth Avenue. I had come over to act as Edison's private 
secretary, the position having been obtained for me through 
the good offices of Mr. E. H. Johnson, whom I had known in 
London, and who wrote to Mr. U. H. Painter, of Washington, 
about me in the fall of 1880. Mr. Painter sent the letter on 
to Mr. Batchelor, who turned it over to Edison. Johnson 
returned to America late in the fall of 1880, and in January, 
1881, cabled to me to come to this country. At the time he 
cabled for me Edison was still at Menlo Park, but when I 
arrived in New York the famous offices of the Edison Electric 
Light Company had been opened at 65 Fifth Avenue, and 
Edison had moved into New York with the idea of assisting in 
the exploitation of the company's business. 

"I was taken by Johnson direct from the Inman steamship 
pier to 65 Fifth Avenue, and met Edison for the first time. 
There were three rooms on the ground floor at that time. The 
front one was used as a kind of reception-room; the room im- 
mediately behind it was used as the office of the president of 
the Edison Electric Light Company, Major S. B. Eaton. The 
rear room, which was directly back of the front entrance hall, 
was Edison's office, and there I first saw him. There was very 
little in the room except a couple of walnut roller-top desks, 
which were very generally used in American offices at that time. 
Edison received me with great cordiality. I think he was 
possibly disappointed at my being so young a man; I had only 
just turned twenty-one, and had a very boyish appearance. 
The picture of Edison is as vivid to me now as if the incident 
occurred yesterday, although it is now [1910] more than twenty- 
nine years since that first meeting. I had been connected 
with Edison's affairs in England as private secretary to his 
London agent for about two years, and had been taught by 
Johnson to look on Edison as the greatest electrical inventor of 
the day a view of him, by the way, which has been greatly 
strengthened as the years have rolled by. Owing to this, and 
to the fact that I felt highly flattered at the appointment as 
his private secretary, I was naturally prepared to accept him 
as a hero. 



xxviii EARLY WORK WITH EDISON 

"With my strict English ideas as to the class of clothes to 
be worn by a prominent man, there was nothing in Edison's 
dress to impress me. He wore a rather seedy black diagonal 
Prince Albert coat and waistcoat, with trousers of a dark 
material, and a white silk handkerchief around his neck, tied 
in a careless knot falling over the stiff bosom of a white shirt 
somewhat the worse for wear. He had a large * wideawake* hat 
of the sombrero pattern then generally used in this country, 
and a rough, brown overcoat, cut somewhat similarly to his 
Prince Albert coat. His hair was worn quite long, and hanging 
carelessly over his fine forehead. His face was at that time, 
as it is now, clean shaven. He was full in face and figure, al- 
though by no means as stout as he has grown in recent years. 
What struck me above everything else was the wonderful 
intelligence and magnetism of his expression, and the extreme 
brightness of his eyes. He was far more modest than in my 
youthful picture of him. I had expected to find a man of 
distinction. His appearance, as a whole, was not what you 
would call * slovenly'; it is best expressed by the word * care- 
less.' " 

Mr. Insull supplements this pen-picture by another, bearing 
upon the hustle and bustle of the moment: "After a short 
conversation Johnson hurried me off to meet his family, and 
later in the evening, about eight o'clock, he and I returned to 
Edison's office; and I found myself launched without further 
ceremony into Edison's business affairs. Johnson had already 
explained to me that he was sailing the next morning, March 2d, 
on the S.S. Arizona and that Mr. Edison wanted to spend the 
evening discussing matters in connection with his European 
affairs. It was assumed, inasmuch as I had just arrived from 
London, that I would be able to give more or less information 
on this subject. As Johnson was to sail the next morning at 
five o'clock, Edison explained that it would be necessary for 
him to have an understanding of European matters. Edison 
started out by drawing from his desk a check-book and stating 
how much money he had in the bank; and he wanted to know 
what European telephone securities were most salable, as he 



EARLY WORK WITH EDISON xxix 

wished to raise the necessary funds to put on their feet the 
incandescent-lamp factory, the electric-tube works, and the 
necessary shops to build dynamos. All through the interview 
I was tremendously impressed with Edison's wonderful re- 
sourcefulness and grasp, and his immediate appreciation of 
any suggestion of consequence bearing on the subject under 
discussion. 

"He spoke with very great enthusiasm of the work before 
him namely, the development of his electric-lighting system; 
and his one idea seemed to be to raise all the money he could 
with the object of pouring it into the manufacturing side of the 
lighting business. I remember how extraordinarily I was im- 
pressed with him on this account, as I had just come from a 
circle of people in London who not only questioned the possi- 
bility of the success of Edison's invention, but often expressed 
doubt as to whether the work he had done could be called an 
invention at all. After discussing affairs with Johnson who 
was receiving his final instructions from Edison far into the 
night, and going down to the steamer to see Johnson aboard, I 
finished my first night's business with Edison somewhere be- 
tween four and five in the morning, feeling thoroughly imbued 
with the idea that I had met one of the great master minds of 
the world. You must allow for my youthful enthusiasm, but 
you must also bear in mind Edison's peculiar gift of magnetism, 
which has enabled him during his career to attach so many men 
to him. I fell a victim to the spell at the first interview." 

WHAT WAS EXPECTED OF EDISON'S PRIVATE SECRETARY 

We are indebted 1 to Mr. Insull for a graphic sketch of Edison 
at this period, and of the conditions under which work was 
done and progress was made: "I do not think I had any under- 
standing with Edison when I first went with him as to my 
duties. I did whatever he told me, and looked after all kinds 
of affairs, from buying his clothes to financing his business. 

1. Vol. I, chap, xv, page 368. The period is that of 1881 and imme- 
diately succeeding years. 



xxx EARLY WORK WITH EDISON 

I used to open the correspondence and answer it all, sometimes 
signing Edison's name with my initial, and sometimes signing 
my own name. If the latter course was pursued, and I was 
addressing a stranger, I would sign as Edison's private secre- 
tary. I held his power of attorney, and signed his checks. It 
was seldom that Edison signed a letter or check at this time. 
If he wanted personally to send a communication to anybody, 
if it was one of his close associates, it would probably be a pencil 
memorandum, signed 'Edison.' I was a shorthand writer, but 
seldom took down from Edison's dictation, unless it was on 
some technical subject that I did not understand. I would go 
over the correspondence with Edison, sometimes making a 
marginal note in shorthand, and sometimes Edison would 
make his own notes on letters, and I would be expected to 
clean up the correspondence with Edison's laconic comments 
as a guide as to the character of answer to make. It was a 
very common thing for Edison to write the words 'Yes' or 'No,' 
and this would be all I had on which to base my answer. 
Edison marginalized documents extensively. He had a won- 
derful ability in pointing out the weak points of an agreement 
or a balance-sheet, all the while protesting he was no lawyer 
or accountant; and his views were expressed in very few words, 
but in a characteristic and emphatic manner. 

ENGINEERING AND MANUFACTURING WORK 

"The first few months I was with Edison he spent most of 
the time in the office at 65 Fifth Avenue. Then there was a 
great deal of trouble with the life of the lamps there, and he 
disappeared from the office and spent his time largely at Menlo 
Park. At another time there was a great deal of trouble with 
some of the details of construction of the dynamos, and Edison 
spent a lot of time at Goerck Street, which had been rapidly 
equipped with the idea of turning out bipolar dynamo-electric 
machines, direct-connected to the engine, the first of which 
went to Paris and London, while the next were installed in the 
old Pearl Street station of the Edison Electric Illuminating 



EARLY WORK WITH EDISON xxxi 

Company of New York, just south of Fulton Street, on the 
west side of the street. Edison devoted a great deal of his 
time to the engineering work in connection with the laying 
out of the first incandescent electric-lighting system in New 
York. Apparently at that time between the end of 1881 
and spring of 1882 the most serious work was the manu- 
facture and installation of underground conductors in this 
territory. These conductors were manufactured by the 
Electric Tube Company, which Edison controlled in a shop at 
65 Washington Street, run by John Kruesi. Half-round cop- 
per conductors were used, kept in place relatively to each 
other and in the tube, first of all by a heavy piece of cardboard 
and later on by a rope; and then put in a twenty-foot iron pipe; 
and a combination of asphaltum and linseed oil was forced into 
the pipe for the insulation. I remember as a coincidence that 
the building was only twenty feet wide. These lengths of 
conductors were twenty feet six inches long, as the half-round 
coppers extended three inches beyond the drag-ends of the 
lengths of pipe; and in one of the operations we used to take 
the length of tubing out of the window in order to turn it around. 
I was elected secretary of the Electric Tube Company, and was 
expected to look after its finance; and it was in this position 
that my long intimacy with John Kruesi started." 



THE SALE OP THE SCHENECTADY WORKS 

"At these new works 1 our orders were far in excess of our 
capital to handle the business, and both Mr. Insull and I were 
afraid we might get in trouble for lack of money. Mr. Insull 
was then my business manager, running the whole thing; and, 
therefore, when Mr. Henry Villard and his syndicate offered 
to buy us out, we concluded it was better to be sure than be 
sorry; so we sold out for a large sum." 

1. Vol. I, chap, xv, page 382. The quotation in this paragraph is 
from Edison. The "new works" are those at Schenectady, N. Y. The 
formation of the Edison General Electric Company followed the sale men- 
tioned. 



xxxii EARLY WORK WITH EDISON 

FIRST THREE- WIRE STATION AND THE "DESTRUCTION 
DEPARTMENT'* 

"The next day 1 Mr. Edison, Mr. Insull and the chief 
engineer of the construction department appeared on the 
scene and wanted to know what had happened. They found 
an engine somewhat loose in the bearings, and there followed 
remarks which would not look well in print. Andrews skipped 
from under; he obeyed orders; I did not. But the plant ran, 
and it was the first three- wire station in this country." 

Seen from yet another angle, the worries of this early work 
were not merely those of the men on the "firing line." Mr. 
Insull, in speaking of this period, says: "When it was found 
difficult to push the central-station business owing to the lack 
of confidence in its financial success, Edison decided to go into 
the business of promoting and constructing central-station 
plants, and he formed what was known as the Thomas A. 
Edison Construction Department, which he put me in charge 
of. The organization was crude, the steam-engineering talent 
poor, and owing to the impossibility of getting any considerable 
capital subscribed, the plants were put in as cheaply as possible. 
I believe that this construction department was unkindly named 
the * Destruction Department.' It served its purpose; never 
made any money; and I had the unpleasant task of presiding 
at its obsequies." 

EDISON'S "SYSTEM" AND A TRIBUTE 

Mr. Samuel Insull describes 2 the business methods which 
prevailed throughout the earlier Menlo Park days of "storm 
and stress," and the curious conditions with which he had to 
deal as private secretary: "I never attempted to systematize 
Edison's business life. Edison's whole method of work would 
upset the system of any office. He was just as likely to be at 

1. Vol. I, chap, xvii, page 428. The speaker in this instance is Mr. 
Frank J. Sprague, and he is describing the building of the Sunbury (Pa.) 
generating station in 1883. 

2. Vol. I, chap, xii, page 278. 



EARLY WORK WITH EDISON xxxiii 

work in his laboratory at midnight as midday. He cared not 
for the hours of the day or the days of the week. If he was 
exhausted he might more likely be asleep in the middle of the 
day than in the middle of the night, as most of his work in the 
way of inventions was done at night. I used to run his office 
on as close business methods as my experience admitted; and 
I would get at him whenever it suited his convenience. Some- 
times he would not go over his mail for days at a time; but other 
times he would go regularly to his office in the morning. At 
other times my engagements used to be with him to go over his 
business affairs at Menlo Park at night, if I was occupied in 
New York during the day. In fact, as a matter of convenience 
I used more often to get at him at night, as it left my days free 
to transact his affairs, and enabled me, probably at a midnight 
luncheon, to get a few minutes of his time to look over his 
correspondence and get his directions as to what I should do in 
some particular negotiation or matter of finance. While it was 
a matter of suiting Edison's convenience as to when I should 
transact business with him, it also suited my own ideas, as it 
enabled me after getting through my business with him to enjoy 
the privilege of watching him at his work, and to learn some- 
thing about the technical side of matters. Whatever knowledge 
I may have of the electric-light-and-power industry I feel I owe 
to the tuition of Edison. He was about the most willing tutor, 
and I must confess that he had to be a patient one." 



AN INTIMATE PERSONAL OPINION OF THE 

PROSPECTS OF THE ELECTRIC LIGHT 

IN 1881 FROM EDISON'S YOUTHFUL 

PRIVATE SECRETARY 

Two months after landing on the soil of the United States 
for the first time, and becoming private secretary to Mr. Edison, 
Mr. Insull wrote a letter to a friend in England which is worth 
preservation for its historical value as well as a real "human- 
interest" document. This letter to Mr. J. E. Kingsbury, 1 
which forms the subject of this chapter, gives a vivid, first-hand 
description of the high hopes, the high-pressure planning, the 
days and nights of hard but enthusiastic work under the direc- 
tion of the master mind of the great inventor at the time when 
incandescent electric lighting and central-station electric serv- 
ice were really in their infancy. A youth of twenty-one 
was the writer of the letter, and the enthusiasm of the boyish 
hero-worshiper is very evident; and yet, at the first flush of 
manhood, to be a trusted assistant among those who were 
bringing into being a great but dimly foreseen industry was 
enough to stir the pulses of a man more sluggish than Mr. 
Kingsbury's correspondent. 

1. Mr. Kingsbury and Mr. Insull, both Englishmen by birth, were asso- 
ciated with Colonel George E. Gouraud, at that time Edison's agent in London, 
from early in 1879 until early in 1881, when Mr. Insull came to the United 
States. As mentioned in the preceding chapter, the youthful Insull was 
Colonel Gouraud's private secretary. His friend Kingsbury handled the 
publicity and advertising affairs of the office, being also associated with an 
uncle who was in the advertising-agency business. Later Mr. Kingsbury 
formed a connection with the English house of the Western Electric Company, 
and for many years he was at the head of the London office, being still (1915) a 
director of the Western Electric Company, Limited. It is rather interesting to 
note that one of the pair became the London representative of Chicago's great- 
est electrical manufacturing concern and the other the head of the great electric- 
service company of Chicago. 

XXXV 



xxxvi PROSPECTS IN 1881 

The letter was written in long-hand on twelve sheets of 
paper. Two pages, the first and the last, are reproduced in 
reduced facsimile. Practically complete, the missive reads as 
follows : 

LABORATORY OP 

THOMAS A. EDISON 

MENLO PARK, N. J. 

Sunday, 1st May, 1881. 
My Dear Kmgsbury: 

I was immensely glad to get your letter of some day I know 
not, as I am writing this at Menlo Park, and the letter from 
you is in my desk at 65 5th Ave., N. Y. 

Mr. Edison and myself came out here last night to spend 
the Sunday. We mistook the time the train started and as 
a consequence we only got within six miles of this [place] and 
came on in a conveyance the exact character and title of which 
I cannot tell you, as it was so dark that I could not see the 
concern with that clearness necessary to an exact description. 
My description of the country must for the same reason go by 
default. 

I am stopping at Edison's house today and shall go back 
to N. Y. in the morning. Edison's people are A No. 1 and 
make it very pleasant for me. This morning Mrs. Edison 
placed a fine pair of grey ponies at my disposal, and I flew 
along the rough Jersey road with a comfort only to be attained 
with the assistance of American ponies attached to the light 
vehicles which abound here. 

Your letter was most acceptable. I was wondering whether 
you had forgotten me altogether, and I am glad to see that you 
have not. Your assumption that I get all the news is quite 
misplaced, and your letter gave me information for which I was 
thirsting. Just go into a little more detail the next time you 
write me. 

A few days after I came here I called on the people con- 
trolling the electric pen here (The Western Electric Mfg. Co.) 



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PROSPECTS IN 1881 xxxvii 

and found out the state of affairs in Australia. They are 
friends of friends of mine, and as I have met most of their 
principal people in London I was on good terms with them 
right away. They told me they had written your brother 
offering him the sole agency and after my explanations said 
they would work with him the more cordially. 

You ask me about Electric Light. Well I have seen 700 
lights burning, the current generated from the same dynamo- 
electric machine for the whole lot, all of them getting their 
current from the same mains (i.e., street cables) of, no less than 
eight miles in length. Edison gets eight lights or thereabouts 
of 16 candles each per indicated horsepower, which allows of his 
competing with gas. Into the details of the cost I cannot go, 
as it is not told to anybody. Suffice it to say that here in 
New York he can produce light and get a handsome profit on 
it at a charge to the consumer which would ruin the gas com- 
panies. There is not, however, that vast difference between 
the cost of the two lights which will allow him to be utterly 
oblivious of his friends, the gas producers; but his estimates 
show that he can compete with them and do it at a handsome 
profit. Besides he can furnish power by means of electric 
motors, which will give him an enormous pull over the gas com- 
panies as he will not have the greater part of his plant lying 
idle during 365 working days of the year, as the gas companies 
with but very slight exception must, as the business is at night; 
but he can sell electricity for power purposes by day, which 
means that his plant is never idle, his capital is never running 
to waste, but is always earning money by night and by day alike. 
Edison will work just as the gas companies do. He will have 
central stations where the current will be generated (probably 
one station of about 15,000 lights to each square mile). This 
current will be conveyed along the streets underground by 
means of copper wire embedded in two-inch iron pipes insulated 
with a special form of insulation of his own invention. Branch 
pipes will be led into each house, and the electricity, whether 
for light or power (to us it is all the same), will be sold by means 
of a registration on an electric meter, which is the most ingenious 



xxxviii PROSPECTS IN 1881 

and yet the simplest thing imaginable. The district which he 
will light up first in New York has about 15,650 lights in the 
various buildings in the district and a great deal of power 
varying in amounts. He is getting contracts just as fast as 
his canvassers apply for them, and we have large gangs of men 
wiring the houses in anticipation of the time when we can lay 
our mains, erect our dynamo machinery and light up. I 
suppose this district will be all lighted up in from three to four 
months, and then you [will] see what you will see. You will 
witness the amazing sight of those English scientists eating that 
unpalatable crow of which Johnson used to speak in his letters 
to me when I was in the old country. 

Menlo Park is practically abandoned. All experiments 
are finished; all speculation on the probable results are dismissed; 
and Edison thinks, and so does everyone else who has looked 
into the matter, that success is assured. Of course time alone 
can prove this. As for myself, I am not competent to judge 
but I can use my eyes, can see the success with which the houses, 
fields, roads and Depot have been illuminated here, and I can 
see nothing to disprove the assertions. His lamps last about 
400 hours; at all events that is the estimate by a time test, i.e., 
by running them at about four times their ordinary candle 
power until the carbons break; but this estimate is every day 
falsified, and experience points to the conclusion that the life 
of his lamps will be much longer than the estimate. As for 
rivals, Edison has but little fear, in fact, none from them . I have 
seen how Maxim's lamps go, and his utter want of a system by 
means of which alone can success be attained, and Swan we put 
in about the same category, but as he is a fellow countryman of 
mine, I will spare you the plain language used towards him. 

To carry out the gigantic undertaking of fighting the gas 
companies we have much to do. A great difficulty is to get 
our machinery manufactured. This Mr. Edison will attend 
to himself. He personally has taken very large works for this 
purpose, where he will probably within the next six months 
have 1,500 men at work. The various parts of the machines 
will be contracted out, one firm making one part in large quan- 



PROSPECTS IN 1881 xxxix 

titles, another firm another part and so on. At Mr. Edison's 
works ("Edison Machine Works"), all these parts will be as- 
sembled and put together. Then there is the lamp factory, 
in which Mr. Edison owns almost all the interest, for manu- 
facturing lamps and which is now turning out one thousand 
lamps a day, the Electric Tube Company (of which I am 
secretary and Mr. E. president) for manufacturing our street 
mains. So you can imagine what Mr. Edison has to do, as he 
is the mainspring and ruling spirit of everything. And you can 
imagine also what I have to do as his private secretary. We 
work every night till the small hours, and today (Sunday) is the 
first Sunday I have not been at the office; and even here we are 
at work, as between the intervals of writing this letter I am 
taking notes of a lot of data he wants before I go to bed tonight. 
I have got right in with Edison, sit in the same room with him, 
assist him in everything, and am his private secretary in every 
sense of the word. People say that he likes me very much; but 
time must be left to prove this. Johnson says my success is 
assured, and last, but not by any means the least, I am abso- 
lutely satisfied that I did the right thing in coming here. 

Please find out for me and let me know at the earliest 
possible moment the exact price per 1,000 ft. at which gas is 
sold by all the various companies in London and also the price 
per ton at which the various kinds of steam and household coal 
can be purchased there in large quantities. Do me the very 
great favour of getting this out to me at once as I have promised 
to get it, as I dispute some figures furnished here. 

[Two short paragraphs, relating principally to personal 
matters, are omitted here.] 

With kind regards to your cousin and uncle and hoping 
to hear from you soon on above points, believe me 

Very sincerely yours, 

SAMUEL INSULL. 
Address me as follows 
65 Fifth Avenue, 
New York, 
U. S. A. 



ADDRESSES OF SAMUEL INSULL 

PROBLEMS OF THE EDISON CENTRAL- 
STATION COMPANIES IN 1897 l 

THE DECISION of the members of the association at the 
last annual meeting to hold their eighteenth convention 
at Niagara Falls was naturally dictated by the world- 
wide interest in the work of generating and distributing elec- 
trical energy, using the famous Niagara River as the prime 
mover. In assembling at a spot where so much can be learned 
by those engaged in the electrical business, we are, as an asso- 
ciation, paying the highest tribute that we can to the wonder- 
ful work of those who have had the courage, as capitalists and 
engineers, to design and build a plant which has given a great 
impetus to the economical production of electricity, not only 
by means of water as the prime mover, but by all other methods 
for the production of electrical energy. We cannot all have 

1. It was in 1892 that Mr. Insull resigned the position of second vice- 
president of the General Electric Company (formed by the consolidation of 
the Edison General Electric Company and the Thomson-Houston Electric 
Company) and became president of the Chicago Edison Company. Barely 
four years later he was elected president of the Association of Edison Illuminat- 
ing Companies, the membership of which, then as now, was made up of the 
electric-service companies of the larger cities of this country. A year after- 
ward, on September 14, 1897, he delivered the presidential address before the 
Edison association which is reprinted here. The convention was held at Niag- 
ara Falls, N. Y., as shown by the text. This is perhaps the first of a long series 
of addresses before societies and associations, many of which are reproduced, 
in whole or in part, in this work. Mr. Insull was thirty-seven years of age 
at the time of its delivery. It is rather remarkable that so many problems 
later discerned to be of vital importance in electric service should be here ap- 
prehended so clearly. Concentration of production, electrical securities as in- 
vestments, the use of larger generating units, the rate question, uniform ac- 
counting, and (with prophetic vision) the welcoming of new inventions, are 
some of the subjects presented in brief for discussion. Unlike nearly all of 
the later addresses, this one was written out in advance and read from manu- 
script. 



2 ADDRESSES OF SAMUEL INSULL 

the advantage of a large waterpower to assist in the economical 
production of our product right at our threshold; but in studying 
the methods employed here at Niagara Falls there is much in- 
formation that we can take away with us which will lead us to 
concentrate our works at the most economical point of produc- 
tion in the various cities in which we live. Further, we can 
take advantage of the methods of distribution here employed 
to distribute our product to distant points, where we desire 
to use it, far more economically than we can produce it at those 
distant points themselves. 

WHY THE EDISON ASSOCIATION WAS FORMED 

Sometimes the question is asked by those engaged in the 
electric light and power business why the companies known as 
"Edison illuminating companies" or "Edison licensees" should 
find it necessary to combine themselves into an association. 
This question is best answered by the fact that the Edison 
illuminating companies all operate under practically the same 
form of contract with the company that controls the Edison 
patents, namely, the Edison Electric Light Company. In the 
main they purchase their goods, under contract, from the same 
licensed manufacturer of the patent-owning company, namely, 
the General Electric Company, and as there is but one Edison 
operating company in each particular city, the interests of these 
various companies are naturally mutual. 

When I remind you that the various companies which we, 
either as officers or employees, have the honor of representing 
here, have invested in their business more than $105,000,000, 1 
it wilt be readily appreciated that it must be greatly to the 
advantage of the various properties which we operate that we 
should meet from time to time to exchange ideas as to the 
proper conduct of our business, and that we should continue 

1. Perhaps this amount would be ten times as great if stated at the present 
day. It is interesting to note that merely the electric-service companies of 
which Mr. Insull is the president at the present time (1915) have a capitali- 
zation much larger than the figure mentioned in the text for all the com- 
panies in the Edison association eighteen years ago. 



CENTRAL STATIONS IN 1897 3 

an organization to watch over our interests in our dealings 
with the patent-owning and manufacturing side of the Edison 
business. 

EXPERIENCE OF INVESTORS 

At what happily would appear to be the close of an unparal- 
leled period of industrial depression, the various Edison illumi- 
nating companies have certainly much cause for mutual con- 
gratulation. Nothwithstanding this long period of paralysis 
of industrial enterprise, they have, with hardly an exception, 
been able to show good earning capacity and to pay to the hold- 
ers of their securities a substantial return on their investment. 
This is partly owing to the inherent merit of our business, 
partly to the wise foresight of the illustrious inventor whose 
system this business is based on, and partly to the conserva- 
tism of the original projectors of the Edison lighting and 
power business, who insisted that the Edison illuminating 
companies should be established on a sound financial basis. 

This experience during the depressed times will necessarily 
lead investors to the conclusion that the securities of the Edison 
illuminating companies are among the most desirable of local 
investments. If it is possible to earn substantial returns on 
capital invested during such periods of business disturbances 
as that which we have recently gone through, surely we can 
look forward to laying up a substantial surplus to provide 
against a "rainy day" during the times of prosperity, which all 
of us hope, and some of us think, we are now entering upon. 

The use of large generating units in the larger stations for 
the production of electrical energy, begun but a few years ago, 
and the necessity of extending the field of our operations into 
distant portions of our territory, have forced upon many of us 
the desirability of employing more economical methods of 
transmission, with a view to the abandonment of small and 
expensive stations and the concentration of our production of 
electricity at the point of greatest economy. This matter 
was touched upon to a certain extent at the last convention. A 
number of our companies are now spending large sums of 



4 ADDRESSES OF SAMUEL INSULL 

money on these lines, and as a result of the importance that this 
subject has assumed it is but natural that a considerable por- 
tion of our time will be occupied in deliberating on this subject. 
In connection with the matter of economical transmission, 
the subject of economical storage is naturally of importance, 
and we should, in the course of our proceedings, be able to 
obtain considerable information on the advantages of the use 
of the storage battery, in connection with the Edison system, 
from those who have had the courage of their opinions and have 
invested largely in storage-battery plants. I think we all 
concede the advantages to be obtained from the use of storage 
battery from the storage point of view only; but some of us 
are still in doubt as to our ability to save sufficient money by 
this plan to justify the large investment required. 

THE RATE QUESTION 

A subject of prime importance in connection with the 
economical production of our product is the basis upon which 
we shall sell it to our customers. It should be remembered 
that we are engaged in a public business, and that our companies 
have duties to perform to the public as well as money to earn 
for our security-holders. In fulfilling our obligations to the 
public the question of the basis of charging for our product is 
the all-important one. This is a matter which on previous 
occasions has received your earnest attention, and is one on 
which there will be undoubtedly earnest discussion on this 
occasion. 

For several years past some of the larger illuminating 
companies, members of this association, notably those of 
Boston, New York and Chicago, have been in the habit of 
comparing the details of cost and selling price of their product, 
their accounts being kept on the same basis, as near as local 
conditions will permit. The information obtained, so far as 
my experience goes, has been of great advantage in enabling 
the companies in question to reduce their cost and in assisting 
them to an intelligent decision as to the policy to adopt towards 



CENTRAL STATIONS IN 1897 5 

their customers. It seems to me that it would be advantageous 
to the members of this association if a uniform system of ac- 
counts were adopted and arrangements made to compare the 
results obtained by the various companies operating under sim- 
ilar conditions. In putting such a scheme into operation a 
number of difficulties would naturally have to be overcome, 
such as the differences in local conditions and the necessity of 
carefully guarding information of so confidential a character; 
but I would suggest the desirability of the association instruct- 
ing the executive committee to take this matter up with a view 
to formulating a plan which might be tried experimentally. 

ESTABLISHMENT OF LAMP-TESTING BUREAU 

The main business of your executive committee during the 
last year has been the negotiating with the General Electric 
Company of a contract and specifications with relation to the 
incandescent lamps used by the Edison licensees who are mem- 
bers of this association. As a result a lamp- testing bureau 
has been established at the lamp factory at Harrison, N. J., 
which bureau is under the control of this association and is 
operated for its account by Mr. Wilson S. Howell. A number 
of our members have taken advantage of the arrangement 
made, and we believe that considerable benefit will accrue to 
those who arrange to purchase their lamps under the contract 
in question. Great credit is due to the chairman and mem- 
bers of the executive committee for the results they have been 
able to achieve, and they are certainly deserving of our thanks 
for the time and money they have spent in this matter for 
our benefit. I think for the first time in the history of the 
electric-lighting business we are now able to obtain lamps made 
according to specifications agreed on, and the results must be 
an improvement in our service and a saving of money to our 
central-station companies. The details as to this matter will 
be carefully dealt with in reports by Mr. C. L. Edgar, chairman 
of the executive committee, and Mr. Wilson S. Howell, the 
testing officer in charge of the bureau at Harrison. 



6 ADDRESSES OF SAMUEL INSULL 

RELATIONS OF OPERATING AND MANUFACTURING COMPANIES 

Relations of the Edison licensees with the Edison Electric 
Light Company and its licensed manufacturer, the General 
Electric Company, have been of the pleasantest character 
during the last year. This is probably owing to the fact that 
those operating the General Electric Company since the con- 
solidation of the Thomson-Houston Company and the Edison 
Electric Company have had fuller opportunity, as time has 
gone by, to appreciate the importance of the Edison licensee 
business to the patent-owning and manufacturing interests. 
The matter of patents continues to be in far from a satisfactory 
condition, the licensees receiving very little protection in the 
enjoyment of the exclusive privileges under the Edison patents 
which they had every reason to look for in view of the large 
amount of royalty paid by them to the parent company. It is 
doubtful whether the Edison Electric Light Company or the 
General Electric Company can be held responsible for this state 
of affairs, as they have continued to spend very large sums of 
money in the prosecution of their patent rights in the courts. 

It is to be regretted that many of the electrical manufactur- 
ing companies continue to foster opposition central-station 
plants, in territory already covered by good paying illuminating 
properties, with the result of seriously affecting the credit of 
the customers upon whom the manufacturers must rely for 
trade, if they desire to create a permanent manufacturing 
business. We have all of us suffered more or less from this 
policy of the manufacturing interests, and while in some cases 
there may possibly be a temporary advantage to one or another 
manufacturer, it is natural for us to wonder what permanent 
advantage can come to the manufacturing interests as a whole 
by the adoption of methods which would seem to have in view 
the ultimate destruction of the goose that lays the golden egg. 

VALUE OF EDISON DISTRIBUTION SYSTEM 

With the many changes that must of necessity take place 
in so new a business as the electric-light-and-power industry, 



CENTRAL STATIONS IN 1897 7 

the question is often raised as to whether or not our plant is of 
a permanent character. A close examination of the Edison 
system must bring home to any one the fact that the wonderful 
inventive and engineering talent displayed by Mr. Edison in his 
early work has given us the advantage of a system that is of 
the utmost permanency. Our main investment, in the larger 
cities at least, is in our underground work, and if you will look 
over the records of the various companies using the Edison 
system, I think you will find that their underground work is as 
useful to them now as when it was laid, and it seems to me that 
there is no reason for us to fear that this condition will change 
in the future. We may have different methods of illumination; 
we may get a higher voltage lamp; we may find that the current 
of the future will not require as large a cross-section of copper 
as in the past; but I doubt if we will find that any method of 
distribution will be invented that will supplant that which we 
are using; and if such be the case, we should rather welcome 
than fear new inventions, feeling that in our particular cities 
we are the most desirable purchasers of any inventions which 
may lessen the cost of electrical energy to our customers. 

When those of us who have been connected with this great 
industry from its early childhood recall the fact that scientists 
and inventors on both sides of the Atlantic persistently con- 
demned the scheme originally laid out by Mr. Edison, we must, 
as central-station managers of today, feel that we owe a deep 
debt of gratitude to him for his courage in insisting that the 
only practicable method of distribution of electrical energy 
was by the use of a constant pressure and a varying current 
when everybody else was talking a constant current and a 
varying pressure. With every desire to pay tribute to the many 
brilliant men who have contributed to the success of the business 
of manufacturing and distributing electrical energy, we venture 
to contend that their work is all subordinate to that of the 
master mind who persisted in the early experimental days at 
Menlo Park in working on a multiple-arc system, without which 
(with the exception of the series arc light) no form of electric 
light or electrical energy could be commercially operated today. 



THE DEVELOPMENT OF THE CENTRAL 

STATION 1 

WHEN requested a short time ago by the chief of the 
electrical department of this university to deliver a 
lecture on some subject connected with central-station 
work, I must confess to some misgivings in accepting the honor, 
remembering the hesitation that a commercial man invariably 
feels in discussing technical matters before those having had 
technical training. Then I remembered that even within my 
own time (and I think I can still lay claim to being a young 
man) very little was known of the general distribution of 
electrical energy from a central station. Further, when I re- 
called that so recently as the early eighties it was necessarily 
the rule for "guessing to be a substitute for mathematics" (to 
use the words of the great pioneer in central-station work), my 
misgivings began to disappear, and I felt encouraged to talk 
to you on the development of the central station from the point 
of view of my own experience in following this, the latest of 
the great industrial developments of the wonderful era in 
which we live. 

In referring to the development of the central station, it 
would seem hardly necessary to go at length into the history of 
the business, the origin of which probably dates from the work 
of the early experimenters whose efforts were directed to the 
perfection of series arc lighting. While their work is entitled 
to the greatest possible praise, it should be remembered that 
the theory on which they worked, namely, constant current 

1. A lecture delivered on May 17, 1898, before the Electrical Engineer- 
ing Department of Purdue University, Lafayette, Ind. This address is not 
only of historical value, but vigorous and far-seeing in treating of the cost of 
money, load factor, the tendency of rates to decrease and other modern studies. 
It was written in advance and read from manuscript. 

8 



CENTRAL-STATION DEVELOPMENT 9 

and varying potential, is a theory foredoomed to failure, when 
applied to the development of a system of general distribution 
for light and power purposes, the first essential of which is the 
necessity for a constant potential, the quantity of current 
varying in accordance with the demands made by those desiring 
to use the energy, whether for light or power purposes. Nor 
does it seem to me a matter very pertinent to the present occa- 
sion to trace the rival claims as to priority of invention of the 
early experimenters on incandescent lamps. Which of them was 
the first to produce a lamp that could be brought to a state of 
incandescence by means of the electric current is hardly within 
the scope of our inquiry. Probably all of them, groping in the 
dark (now and then illumined by the flashes of light emitted 
from their experimental glow lamps), contributed in a more 
or less degree to the perfection of the incandescent lamp as 
now in everyday use. But so far as their contributing much 
that is substantial, in the development of a system of central- 
station distribution, it is probable that, up to the year 1880, 
there was but one man who realized that in solving the great 
problem of electrical distribution the perfection of a filament of 
high resistance, which, placed in a hermetically sealed glass 
globe from which the air had been exhausted, and connected 
in multiple arc across an electric circuit, was the first necessity 
to the distribution of electrical energy in our cities from a 
central-station system. 

THE HIGH-RESISTANCE INCANDESCENT LAMP 

In Mr. Edison's application for a United States patent on a 
system of electrical distribution, filed at Washington on Febru- 
ary 5, 1880, he says: 

The translating devices for each house may be either for light or power, 
or both. For light, the electric lamp, consisting of an incandescing material 
hermetically sealed in glass (shown in other applications made by me) is 
preferred. This lamp is made of a high resistance in comparison with that of 
any electric lamps which, to my knowledge, have been proposed. In lights 
heretofore proposed the endeavor seems to have been to lessen the resistance 
of the carbon, none having been suggested of higher resistance than, say, 10 
ohms; but I have discovered that a very much higher resistance, say 100 
ohms, must be used, in order that a number may be economically and success- 
fully used in a system. 



10 ADDRESSES OF SAMUEL INSULL 

The question of the high resistance of the translating device 
was the first stepping-stone to success. Everybody prior to 
Edison had aimed at getting a low-resistance lamp, I presume 
on the theory that the less the resistance of one the less the 
resistance of the whole series. Edison struck out on new lines. 
A high-resistance lamp was naturally followed by a multiple-arc 
system. 

In writing of the necessity of a high-resistance lamp, the 
applicant for the patent had in mind that a system of electrical 
distribution could be used at the same time not only for lighting, 
but for power purposes, if the motors were properly constructed, 
and this is shown by the next paragraph in his application, which 
states : 

The motors should be so constructed that each, with a constant flow or 
pressure of current, will give the exact power required. This requires that 
each motor should be wound with finer or coarser wire, and into more or less 
convolutions, which determine the maximum effect of the motor. 

If you will search the files of the daily and technical journals, 
and the proceedings of various scientific societies on both sides 
of the Atlantic from the summer of 1878 up to and including the 
year 1882, you will find that the great obstacles in the way of an 
economical system of central-station distribution were the 
difficulties of producing a lamp that would last, one requiring 
only a minimum of current, and a system of electrical distribu- 
tion requiring a minimum of capital, so as to enable electricity to 
compete with then existing methods of illumination and power. 
Professor Henry Morton, on December 28, 1879, says in the 
New York Times: 

The first difficulty of all is the production of a lamp which shall be thor- 
oughly reliable, and neither complicated nor expensive. All attempts up 
to the present lamp in this direction are acknowledged to be failures, and as I 
have pointed out, there does not seem to be any novelty such as would author- 
ize us to hope for better success than the present one. The next difficulty is 
the economical production of small lights by electricity. This is what is com- 
monly meant by the phrase, "dividing the electric light." Up to the present 
time, and including Mr. Edison's latest experiments, it appears that this 
involves an immense loss of efficiency. 

Next comes the difficulty of distributing on any large scale the immense 
electric current which would be needed, and to provide for their equal action 
at different points under varying conditions of the number of lights used. 



CENTRAL-STATION DEVELOPMENT 11 

"SUBDIVIDING THE ELECTRIC LIGHT" 

Again Mr. Conrad Cooke, giving evidence before the 
British Parliamentary Commission in 1879, in answer to the 
question: "Supposing that the occupier of one house wished 
to put out his lights, how would this be effected?" replied: 

In that case, if you throw out a lamp or throw out a house, you must 
throw into the circuit a resistance exactly equal to what you cut out. If you 
do not do that, you will affect every lamp in the series and the machine as well. 
If you put out your lights by breaking the circuit, you put out every light in 
the series. 

In answer to another question at the same parliamentary 
inquiry, Mr. Cooke said (referring to Dr. William Siemens, who 
had been named in the question) : 

His nephew told me himself that he had seen, I think, over 200 lamps on 
one of Edison's circuits. 

And Mr. Cooke added: 

I must say I should like to see it myself, and that is all I can say. 

It is quite evident from this that Conrad Cooke, very well 
known in England as a prolific writer on the subject of electrical 
experiments, had in mind, in 1879, nothing better than the series 
system, that is a number of incandescent lamps run precisely 
the same as arc lamps, or, to put it another way, his idea of the 
electric lighting system was a varying potential and a constant 
current, which could never be run on a large scale successfully. 
Sir William Thomson (Lord Kelvin), referring to the same 
parliamentary inquiry of 1879, says: 

I had not myself, at that time, any idea leading toward the practical real- 
ization of any such distribution of conductors and placing the lights as outlined 
in the Edison mulitple arc and feeder system. 

Evidently Mr. Swan, the English inventor, had no idea 
of the feeder system as late as October, 1880, as in a lecture 
before the Literary and Philosophical Society of Newcastle, 
England, at that time, he said: 

The only way of avoiding this waste of energy, without abandoning the 
idea of small units of light, would be either to employ enormously thick con- 
ductors, or have a very limited area supplied from one source. 



12 ADDRESSES OF SAMUEL INSULL 

Mr. Swan was referring to Mr. Edison's plain multiple-arc 
system, as set forth in his application of February, 1880. The 
last eight words of this quotation prove that Mr. Swan did not 
then know of Mr. Edison's feeder system, application for patent 
on which was made on the 9th of August, 1880, and was patent- 
ed in England on the 24th of September of the same year. It 
would seem that even in 1882 Mr. Swan, who himself at that 
time must have been informed as to Mr. Edison's invention of 
the feeder system, could not have appreciated the possibilities 
of such a system, as, in a paper communicated to the British 
Association at Southampton in August of that year, he said : 

The only escape from that limitation (extent of distribution) lay in having 
secondary batteries at stations or in houses, and in these batteries being con- 
nected in series, and fed by currents of higher tension, the principle still hold- 
ing of multiple arc, not from the central station, but from the subsidiary 
ones from which the batteries are charged. Once imagine the possibility of 
these secondary batteries being kept at a perfectly constant condition of 
charge by some automatic arrangement, and we might look to that as a means 
of escaping from the difficulties of wide distribution. 

EARLY DISCUSSION IN ENGLAND 

Again we find that Dr. Siemens, before the Society of Arts 
in London, on the 15th of November, 1882, declared that 

It would be possible to establish electrical mains in the shape of copper 
rods of great thickness with branches diverging from them in all directions, 
though he was himself decidedly averse to such a plan. He said he would 
limit the area of the densely populated district to one quarter of a square mile, 
notwithstanding other individuals of high standing in electrical circles held 
that areas of from one to four square miles could be worked to advantage. 

Dr. Siemens went on to say: 

In considering the proper size of conductors, two principal factors have to 
be taken into account: First, the charge for interest and depreciation on the 
original cost of a unit length of the conductor, and secondly, the cost of the 
electrical energy lost through the resistance of a unit of length. The sum of 
these two, which may be regarded as the cost of the conveyance of electricity, 
is clearly least, as Sir William Thomson pointed out some time ago, when the 
two components are equal. This, then, is the principle on which the size of a 
conductor should be determined. 

Sir William Thomson, commenting on Dr. Siemens' remarks 
of November 15, 1882, before a commission taking evidence 
with relation to the Edison feeder patent, said: 



CENTRAL-STATION DEVELOPMENT 13 

There is not a word here of the necessity to secure against too great drop 
of electric potential between the dynamo and the lamps, or too great differ- 
ences of drop between the different lamps of the system, and the narrow limita- 
tion of the area insisted upon shows that Dr. Siemens had no idea of Edison's 
solution of the problem, and thought only of overcoming the difficulty by 
enormously massive copper conductors with branches diverging from them to 
the points of consumption. From his earliest commencement as an inventor 
and engineer, Siemens had been occupied with water and gas. His first inven- 
tion was a water-meter, and it is not probable that anyone in the years 1879-80 
knew better than he t did of the difficulties met with in the distribution of 
water and gas and of the methods which had been practically used or proposed 
for overcoming them. 

Again referring to this subject, the same authority said: 

About that time, or a little later, one of our first electrical engineers, Mr. 
Crompton, who has, in fact, been the first to introduce successfully and on a 
large scale, lighting from a central station in London, told me that he was 
obliged to use larger copper conductors than would be required merely in accord- 
ance with my principle for economy, in order to avoid so great a drop in poten- 
tial as would be inconsistent with the good working of the lamps. At that 
time he had no idea of the feeder system, which he has since adopted with 
marked success in the Kensington-Knightsbridge electric lighting. Siemens' 
solution was not augmenting the size of the conductors above that calculated 
from the economic law, but to limit the size of the station supplied. Neither 
this nor the solution first proposed by Crompton is satisfactory in respect to 
the practical demands for the electric lighting of towns. Edison's feeder sys- 
tem is now universally admitted to be satisfactory to a very remarkable degree. 
I am asked why did not some one else invent it. The only answer to this, the 
last part of the question, that I can think of, is that no one else was Edison. 

Well do I remember Sir William Thomson's visit to the 
Pearl Street station in New York, in 1884, when he saw the 
Edison feeder system first in operation, and the great interest 
that he exhibited in studying it, and his admiration for the work 
accomplished by Mr. Edison. 



VALUE OF EDISON'S WORK 

I have thought it necessary to quote at length some of the 
leading English authorities on electrical matters, as I thought 
it would be better, in asserting for an American the conception 
of the true basis of electrical distribution for light and power 
purposes, to give you the opinion and views on the matter of 
distribution of our "kin beyond the sea" rather than to quote 
the views of American scientists who might possibly be consid- 
ered more partial to the work of their own countryman. 



14 ADDRESSES OF SAMUEL INSULL 

It is often said that the principles of constant-potential 
multiple-arc distribution and the use of feeders to maintain 
an equal and economical distribution of pressure are self- 
evident propositions, following the lines of gas and water dis- 
tribution; but when you have such high authorities as Conrad 
Cooke in 1879 failing to recognize any of these necessities, of 
Mr. Swan in 1880 only recognizing the principles of multiple 
arc, and in 1882 failing to recognize the importance and far- 
reaching results of the feeder system, and Dr. Siemens as late 
as November, 1882, two months after a central station was in 
operation in New York city, adopting almost the same views 
as Mr. Swan, you can not wonder at Lord Kelvin answering the 
question as to why some one else did not invent the feeder 
system by saying, " The only answer to this, that I can think of, 
is that no one else was Edison." 

It would seem to me, with such authorities, that it is not 
unreasonable to contend that the development of the central 
station and distribution system connected therewith dates 
from Mr. Edison's work at Menlo Park. Mr. Edison had been 
engaged during the early seventies, first as a telegraph operator 
in the Western Union service, and later working on the gold 
indicators in the gold room in New Street, New York, during 
the stirring period of speculation in the precious metal which 
culminated on Black Friday in 1873. Professor C. C. Law, 
now connected with the University of Missouri, had, I believe, 
charge of the indicating instruments, and it is a matter of some 
interest to record the fact that the first work Mr. Edison did 
of an inventive character which yielded him a financial return 
was in connection with and while he was at work on the gold 
indicators in question. Subsequently he was employed in the 
interest of what is now the Western Union Telegraph Company 
in improving the now universally used stock ticker. This was 
followed by brilliant and successful work in connection with the 
duplex and quadruplex and automatic systems of telegraphy, 
and the invention of the phonograph and that part of the tele- 
phone now generally used for transmitting purposes and known 
as the carbon transmitter. His attention to the possibilities of 



CENTRAL-STATION DEVELOPMENT 15 

what is popularly called the subdivision of the electric light was 
probably the result of a visit he paid to Mr. William Wallace 
at Ansonia in the fall of 1878, where he saw some experiments on 
dynamo-electric machines, and on his return to Menlo Park he 
started his experiments on a system of electric light and power, 
which culminated in the successful starting of the first central 
station, in the lower portion of New York city in September, 
1882. 

THE PANIC IN GAS SHARES 

The public interest aroused in Mr. Edison's work and the 
controversy as to whether it was possible to achieve anything 
that would be of a commercial value is manifested by the con- 
stant reference to the matter in the public press in 1878, 1879, 
and 1880, resulting in a panic in gas securities in London in 1878 
and in New York in 1879. Probably the work of no inventor 
was more generally discussed on both sides of the Atlantic by 
laymen and technical authorities alike than was that of Mr. 
Edison on his electric lighting and power system. All kinds of 
comparisons were made as to the difference between the cost 
of gas and the cost of electricity. It was declared by some 
that Mr. Edison could not possibly be considered as having 
succeeded in his work unless he could produce an illuminant 
that would compete commercially with gas. These objectors 
lost sight of the fact that the characteristics of the two illumin- 
ants were quite different, and that there was no more reason for 
supposing that, if electricity were more expensive than gas, 1 the 
cost would be a barrier to its use any more than there is reason 
for supposing that gas should be considered a commercial failure 
because the poorest classes find it cheaper to use tallow dips. 

The probable reason for scientists and electricians doubting 
the possibility of a successful electric-lighting system being 
produced was that all previous experimenting on incandescent 
lamps had been, as I have already stated, aiming at producing 
a lamp of the lowest possible resistance, and consequently 

1. This was written, of course, long before the introduction of the tungsten 
lamp and modern methods of making and selling electricity had brought about 
the present low price of electric lighting. 



16 ADDRESSES OF SAMUEL INSULL 

requiring the greatest possible amount of current, these lamps 
being run in series, whereas Mr. Edison, at a comparatively 
early stage of his work, realized that the first essential was a 
lamp of high resistance, and that the only way of approximating 
an even distribution of pressure was to run these lamps in mul- 
tiple arc. Hence his application for a patent on a lamp with a 
high-resistance filament, under date of November 4, 1879, and 
his application on multiple-arc distribution in February, 1880. 
It was then but a short time before he realized that, although 
experimentally this might give him even pressure, the expense 
of the copper in his distribution system would be too great, 
owing to the necessity of increasing the size of his copper, as 
he got farther and farther from the point of generation. The 
result was that in August, 1880, he applied for his patent on a 
system of feeders to supply his system of mains at various points 
throughout the system, the effect being a compact system with 
current flowing in all directions from the central point of genera- 
tion through feeders, by means of which even pressure could be 
maintained throughout a considerable area. 

UNDERGROUND WORK AND THREE- WIRE SYSTEM 

A still further step made by Mr. Edison was the realization 
that nothing very reliable in the way of a distribution system 
in large cities could be maintained unless the work was placed 
underground, and, as a result of his work of a little over two 
years, we find that in the early winter of 1880 Edison had a 
central-station system experimentally at work at Menlo Park, 
N. J., having an underground two-wire system, with the homes 
of himself and his staff electrically illumined by incandescent 
lamps, motors at work in his laboratory, and, in fact, all of the 
essential features of what is today now so common from the 
largest cities to the smallest villages throughout the whole 
civilized world. 

It was but a short time after the starting of the first central 
station, in New York, that Mr. Edison found himself looking for 
some more economical methods of distribution; and I well re- 
member his first experiments on the three- wire system, when, at 



CENTRAL-STATION DEVELOPMENT 17 

his shop in Goerck Street, New York, he placed a third brush on 
the neutral point of the commutator of a small bipolar Edison 
dynamo and demonstrated the practicability of the three-wire 
system. 

At the same time that Edison was working on the three- 
wire system experimentally in New York, Dr. John Hopkinson 
was probably figuring out the same thing in England, and 
Werner von Siemens was engaged in similar work in Germany. 
The records of the United States, English, and German patent 
offices bear witness to the fact that these three men accom- 
plished about the same results at about the same time, and, as 
a consequence, between 60 and 70 per cent of the investment 
in copper was saved. 

It is not my wish to address you on the scientific or technical 
side of central-station development. I have thought it neces- 
sary to go at length into the early work of the art for the purpose 
of giving you some idea of the position to which Mr. Edison is 
entitled as the father of central-station work. My limited 
knowledge of the technique of the business would not permit 
me, even if I wished, to discuss the details of his early work, or 
of the early work of other experimenters; but I assure you that 
daily familiarity with the operation of one of the largest central 
stations in this country gives me a higher and higher apprecia- 
tion of the simplicity and thoroughness and adaptability to 
all purposes of electrical distribution of the great work accom- 
plished by the "Wizard of Menlo Park." 

PEARL STREET STATION IN NEW YORK 

As a result of the experiments at Menlo Park, Mr. Edison, 
early in the winter of 1880, started to get together the neces- 
sary data for the establishment of a central-station and dis- 
tributing system in New York, in the district bounded by Wall 
Street on the south, Nassau Street on the west, Peck's Slip 
on the north, and South Street on the east, a territory covering 
about 2,000 feet square. He had each house thoroughly 
canvassed to show the number of lights in use, the number of 
hoistways and elevators, and the horse-power of the engines 



18 ADDRESSES OF SAMUEL INSULL 

running machinery. As a result of this canvass, the Edison 
Electric Illuminating Company of New York was formed and 
drawings prepared for a central station, which was erected at 
255 and 257 Pearl Street, the rating of the station being 2,000 
horse-power, and the district fed by a system of half-round 
copper mains and feeders, the mains being enclosed in lengths 
of iron pipe and insulated by a bituminous compound, each 
length of main being between twenty and twenty-one feet, so 
that it was possible to take off a service at each house. 

Time will not permit me to go into the details of construction 
of this, the first central distribution system. The boilers were 
placed below the engine floor and were of the horizontal water- 
tube type, made by Babcock & Wilcox, carrying a pressure of 
125 Ibs., the steam machinery and dynamos being of the direct- 
connected type and placed on a steel structure not dissimilar 
to that of some portions of the elevated-railroad structure in 
New York. 

Great care was taken in figuring out the system of mains 
and feeders, an immense map of the district showing the prob- 
able consumption of current in the various parts of the territory. 
It should be remembered that the path to be followed was 
practically unknown; that electrical distribution on a large 
scale was as much of a hidden secret as an unexplored continent. 
The remarkable thing is that this first experimental system 
was a practical success, and a return on the money invested 
was being earned before electricians at home and abroad would 
recognize the success of the undertaking. It is but natural 
to find that many devices were used which were subsequently 
discarded. For instance, an elaborate system of resistances 
placed in series with the feeders was employed for maintaining 
an even pressure, entailing a considerable waste of energy. 
The lamp employed was not more than one-half as efficient as 
that used today 1 while the cost of manufacture was many times 

1. Mr. Insull was speaking, of course, of the carbon-filament lamp as 
developed in 1898. A comparison between the pioneer lamps of 1880-1881 
and the tungsten lamps of today (1915) would be still more marked. Prob- 
ably the early lamps were not more than one-sixth as efficient as those now 
in everyday use. 



CENTRAL-STATION DEVELOPMENT 19 

greater, and it had not one-quarter of the life of the present 
commercial incandescent lamp. 

CONDITION OF THE ART IN 1880 

It might be well to pause for a moment and picture the 
condition of the art at that time. I refer to the winter of 1880. 
The plans for the central station were completed; the details of 
construction of the conductors in the street were all on paper; 
the dynamos and electrical instruments had no existence except 
on the draughting board; practically nothing was known of 
modern methods of insulation or house-wiring; the socket and 
switch in use today had not been thought of, the miscellaneous 
devices now considered necessary in connection with house-wir- 
ing had not been considered. In addition to the development 
of the system and its installation, manufacturing establish- 
ments had to be created in which to manufacture the first 
material needed, and Mr. Edison and his corps of assistants 
had to abandon the experiments of the laboratory and the de- 
signing of the draughting-room to equip and manage shops in 
which to manufacture the apparatus necessary, from the gen- 
erator to the lamp. Others have followed the beaten track, 
others have improved upon the methods employed, but the 
conception of the system, the perfecting of the original appara- 
tus, its manufacture, its installation, and its early operation 
were all borne by an enthusiastic but small band of workers 
having an almost idolatrous belief in their chief as the pioneer 
of this great industry. 

I have brought with me tonight a photograph of the 
original direct-connected steam generator known as the "Jum- 
bo" machine, used in the Pearl Street station, composed of an 
engine manufactured by Armington & Sims of Providence, R. L, 
of the single-cylinder type, running at a speed of 350 revolu- 
tions, with what is practically the old form of Edison bipolar 
machine changed from a vertical to a horizontal position. The 
armature, instead of being wound with coils of wire, was built 
up of copper disks and bars. If you will glance from this to the 
picture of a modern central station unit composed of a com- 



20 ADDRESSES OF SAMUEL INSULL 

pound, triple, or quadruple-expansion engine, 1 with a multi- 
polar dynamo connected directly on the engine shaft, you will 
find that the same broad engineering idea is alike apparent 
in the earliest and latest central-station unit. The improve- 
ments in dynamo manufacture have enabled us to use lower 
speed engines, but the broad principle of direct connection is 
alike the same in both. That we should come back to exactly 
what Mr. Edison used in the earliest central-station work is no 
mean tribute to him as an engineering authority. 

The delay which necessarily occurs in carrying every new 
enterprise to a financial success acted as a wet blanket on 
central-station development. Efforts were made to cheapen 
construction when it was found that capitalists in large cities 
were unprepared to risk their money in the enterprise. The 
apparatus was adapted to the requirements of smaller com- 
munities, and, as a result, a number of small stations were 
established throughout the country, especially in Pennsylvania, 
Ohio, and Massachusetts. 2 The development of the central- 
station business for several years was confined to this class of 
work. The service was far from reliable, owing mainly to the 
necessity of doing the cheapest possible engineering and con- 
struction in order to meet the necessities of the slim exchequers 
of those who were bold enough to embark their capital in this 
business; but the Pearl Street station, started on September 5, 
1882, with 5,500 lamps, rapidly developed, and in the fourteenth 
month of continuous running had 508 customers, wired for 
12,732 lamps. Comparatively little work was done in central- 
station lighting in Europe. A small station was started in 
Dijon, France, in June, 1883, and in the same year installa- 
tions were made in Santiago, Chile; Milan, Italy; on Holborn 
Viaduct, London, and in Manchester, England. 

1. This was before the day of the steam turbine in electric generating- 
station design. See illustrations of the "Jumbo" machine and of the Harrison 
Street (Chicago) generating station of 1898 (with triple-expansion engines) 
in the chapter entitled "A Quarter-Century Central-Station Anniversary Cele- 
bration in Chicago," beginning on page 316. 

2. A small station in Appleton, Wis., was opened about, or a little before, 
the time of the opening of the Pearl Street station. 



CENTRAI^STATION DEVELOPMENT 21 

How THE IDEA SPREAD 

The success of the Pearl Street station resulted in the ex- 
tension of the New York system and the building of two stations 
up-town in New York, one in Twenty-sixth Street, and the 
other in Thirty-ninth Street. This was followed by a station 
in Boston and another in Brooklyn. In 1887 the building of the 
first station in Chicago was started, the average load, as shown 
by the composite ampere curves of that station, being not much 
over 500 amperes for the year 1888. These latter stations the 
two in New York, the one in Boston and the one in Chicago 
were equipped with high-speed engines belted to Edison bipolar 
dynamos of the Siemens armature type, in some cases the en- 
gines and dynamos being on the same floor, in other cases the 
engines being belted to the dynamos on the floor above. Nu- 
merous other stations were started, so that by 1890 upwards of 
sixty cities were equipped with the direct-current low-tension 
system, all of which, and numerous others, are today so remu- 
nerative that their securities are considered among the most 
desirable local investments, especially in cities of the first and 
second rank. 

The success of the low-tension system was followed by 
the introduction of the alternating-current system, using high- 
potential primaries with transformers at each house, reducing, 
as a rule, from 1,000 down to either 50 or 100 volts. I am not 
familiar with the early alternating work, and had not at my 
disposal sufficient time in preparing my notes to go at any 
length into an investigation of this branch of the subject; nor 
do I think that any particular advantage could have been served 
by my doing so, as it has become generally recognized that the 
early alternating work with a house-to-house transformer 
system, while it undoubtedly helped central-station develop- 
ment at the time, proved very uneconomical in operation and 
expensive in investment, when the cost of transformer is added 
to the cost of distribution. The large alternating stations in 
this country have so clearly demonstrated this that their re- 
sponsible managers have, within the last few years, done every- 



22 ADDRESSES OF SAMUEL INSULL 

thing possible, by the adoption of block transformers and three- 
wire secondary circuits, to bring their system as close as they 
could in practice to the low-tension direct-current distribution 
system. I do not want to be understood as undervaluing the 
position of the alternating current in central-station work. 
It has its place, but to my mind its position is a false one 
when it is used for house-to-house distribution with trans- 
formers for each customer. 

The success of the oldest stations in this country and the 
demonstration of the possibilities of covering areas of several 
miles in extent by the use of the three-wire system resulted in 
much capital going into the business. One of the earliest sta- 
tions of a really modern type installed on either side of the 
Atlantic was built by the Berlin Electricity Works. The 
engineers of that station, while recognizing the high value of 
the distributing system, went back to Edison's original scheme 
of a compact direct-connected steam and electric generator, 
but with dynamos of the multipolar type designed and built by 
Siemens & Halske of Berlin, the engines being of vertical marine 
type. This was followed by the projecting in New York of the 
present Duane Street station, employing boilers of 200 pounds 
pressure, triple and quadruple-expansion engines of the marine 
type, and direct-connected multipolar dynamos. Almost im- 
mediately thereafter the station in Atlantic Avenue, Boston, 
somewhat on the same general design so far as contents is 
concerned, was erected. In 1891 a small station, but on the 
same lines, was projected for San Francisco, and in 1892 the 
present Harrison Street station 1 of the Chicago Edison Company 
was designed, and, benefiting by the experience of Berlin, New 
York and Boston, this station produces electricity for lighting 
purposes probably cheaper than any station of a similar size 
anywhere in this country. 

ALTERNATING-DlRECT-CURRENT COMBINATION 

To go back to the question of alternating currents, the 
work done in connection with the two-phase and three-phase 

1. Now (1915) considered obsolete and held in reserve or used as a sub- 
station. 



CENTRAL-STATION DEVELOPMENT 23 

currents and the perfection of the rotary converter has 
resulted in introducing into central-station practice a further 
means of economizing the cost of production by concentration 
of power. According to present experience, it is (except in 
some extraordinary cases) uneconomical to distribute direct 
low-tension energy over more than a radius of a mile and a 
half from the generating point. The possibility of transmitting 
it at a very high voltage, and consequently low investment in 
conductors, has resulted in the adoption of a scheme, in many 
of the large cities, of alternating transmission combined with 
low- tension distribution. The limit to which this alternating 
transmission can be economically carried has not yet been defi- 
nitely settled, but it is quite possible even now to transmit 
economically, from the center of any of our large cities to the 
distant suburbs, by means of high-potential alternating currents, 
distributing the energy from the sub-center distribution by 
means either of the alternating current itself and large trans- 
formers for a block or district, or else if the territory is thickly 
settled, by means of a system of low-tension mains and feeders, 
the direct current for this purpose being obtained through the 
agency of rotary converters. 

There are various methods of producing the alternating 
current for transmission purposes. In some cases the gener- 
ators are themselves wound for high potential; in others they 
are wound for, say, 80 volts, and step-up transformers are used, 
producing whatever pressure is desired, from 1,000 to 10,000 
volts. In other cases dynamos are used having collector rings 
for alternating current on one side and a commutator for direct 
current on the other side of the armature, thus enabling the 
operator, when the peak in two districts of a city comes at two 
different times, to take care of this peak by means of the same 
original generating unit, furnishing direct low-tension current to 
the points near the central station, and alternating current to 
the distant points. In other cases, where a small amount of 
alternating current is required on the transmission line, it 
has even been found economical to take direct current from 
a large unit, change it by means of a rotary converter into 



24 ADDRESSES OF SAMUEL INSULL 

alternating current, step up from 80 to, say, 2,000 volts, go to 
the distant point, and step down again to 80 volts alternating, 
and then convert again by means of a rotary converter into 
low-potential direct current. 

The introduction of alternating current for transmission 
purposes in large cities is probably best exemplified by the 
station recently erected in Brooklyn, whence alternating current 
is produced and carried to distant points, and then used to 
operate series arc-light machines run by synchronous motors, 
the low-tension direct-current network being fed by rotary 
converters, and alternating circuits arranged with block trans- 
formers, and even in some cases separate transformers, for each 
individual customer in the scattered districts. 

THE MOST SERIOUS PROBLEM IN CENTRAL-STATION 

MANAGEMENT 

Passing from a review of central-station plants and dis- 
tribution systems naturally brings us to the operating cost and 
the factors governing profit and loss of the enterprise. In con- 
sidering this branch of the subject, I will confine my remarks 
to the business as operated in Chicago by the company with 
which I am connected. 

Our actual maximum last winter came on the 20th of 
December, our load being approximately 12,000 horse-power. 1 
A comparison of the figures of maximum capacity and maximum 
load of last winter shows that we had a margin in capacity over 
output of about 20 per cent. The load curves represent the 
maximum output of last winter (December 20th), an average 
summer load last year (June 4th), and an average spring load 
of this year (May 2d). For our purposes we will assume the 
maximum capacity of the plant and the maximum load of the 
system to be identical. The maximum load last winter oc- 
curred, as I have stated, on December 20th, about 4 :30 o'clock 

1. For comparison it may be mentioned that the maximum demand on 
the Commonwealth Edison Company, successor to the Chicago Edison Corn- 
Company, was 306,200 kilowatts (about 410,000 horse-power) on December 
15, 1914. This shows that in a period of seventeen years the maximum de- 
mand increased thirty-four times. 



CENTRAL-STATION DEVELOPMENT 25 

in the afternoon, and lasted less than half an hour. It should 
be borne in mind that the period of maximum load only lasts 
for from two to three months, and that the investment necessary 
to take care of that maximum load has to be carried the whole 
year. It should not be assumed from this statement that the 
whole plant as an earning factor is in use 25 per cent of the 
year. The fact is that, during the period of maximum load, 
the total plant is in operation only about 100 hours out of the 
8,760 hours of the year; so that you are compelled, in order to 
get interest on your investment, to earn the interest for the 
whole of the year in about 1.5 per cent of that period, on about 
50 per cent of your plant. 

This statement must bring home to you a realization of 
the fact that by far the most serious problem of central-station 
management, and by far the greatest item of cost of the product, 
is interest on the investment. It may be that the use of storage 
batteries in connection with large installations will modify this 
interest charge, but even allowing the highest efficiency and the 
lowest cost of maintenance ever claimed for a storage-battery 
installation, the fact of high-interest cost must continue to be 
the most important factor in calculating profit and loss. This 
brings home to us the fact that in his efforts to show the greatest 
possible efficiency of his plant and distribution system, it is 
quite possible that the station manager may spend so much 
capital as to eat up many times over in interest charge the sav- 
ing that he makes in direct operating expenses. It is a com- 
mon mistake for the so-called expert to demonstrate to you 
that he has designed for you a plant of the highest possible 
efficiency, and at the same time for him to lose sight of the 
fact that he has saddled you with the highest possible amount 
of interest on account of excessive investment. Operating 
cost and interest cost should never be separated. One is as 
much a part of the cost of your energy as the other. This is 
particularly illustrated in connection with the use of storage 
batteries. Those opposed to their use will point out to you that 
of the energy going into the storage battery only 70 per cent 
is available for use on your distribution system. That state- 



26 ADDRESSES OF SAMUEL INSULL 

ment in itself is correct; but in figuring the cost of energy for a 
class of business for which the storage battery is particularly 
adapted, the maximum load, that portion of your operating 
cost affected by the 30 per cent loss of energy in the battery, 
forms under 4.5 per cent of your total cost, and it must be 
self-evident, in that case at least, that the 30 per cent loss in 
the storage battery is hardly an appreciable factor in figuring 
the operating cost of your product. So far as I have been able 
to ascertain, it would appear to be economical to use storage 
batteries in connection with central-station systems the peak 
of whose load does not exceed from two to two and one-half 
hours. 

INFLUENCE OF INTEREST ON COST 

In order to illustrate the important bearing which interest 
has on cost, I have prepared graphical representations [not 
shown] of the cost of electricity, including interest, under condi- 
tions of varying load factors. For the purpose of this chart I 
have assumed an average cost of energy, so far as operating 
and repairs and renewals and general expense are concerned, 
extending over a period of a year, although of course these items 
are more or less affected by the character of the load factor. For 
the purpose of figuring interest, I have selected seven different 
classes of business commonly taken by electric-light-and-power 
companies in any large city. Take, for instance, an office build- 
ing. It has a load factor of about 3.7 per cent; that is, the aver- 
age load for the whole year is 3.7 per cent of the maximum de- 
mand for electricity at any one time during that period; or, 
to put it another way, this load factor of 3.7 per cent would 
show that your investment is in use the equivalent of a little over 
323 hours a year on this class of business. This is by no means 
an extreme case. You can find in almost every large city cus- 
tomers whose load factors are not nearly as favorable to the 
operating company, their use of your investment being as low 
as the equivalent of 75 or 100 hours a year. Take another class 
of business, that of the haberdasher, or small fancy -goods store. 
As a rule these stores are comparatively small, with facilities for 



CENTRAL-STATION DEVELOPMENT 27 

getting a large amount of natural light and little use for artificial 
light. The load factor is about 7 per cent, the use of the 
investment being not quite twice as long as that of the office 
building. Day saloons show an average of 16 per cent load 
factor; cafetierias and small lunch counters about 20 per cent, 
while the large dry -goods stores, in which there is comparatively 
little light, have a load factor of 25 per cent and use the in- 
vestment seven times as long per year as the office building. 
Industrial business naturally shows a still better load factor, 
say 35 per cent, and the all-night restaurant has a load factor 
of 48 per cent. 

THE QUESTION OF LOAD FACTOR 

You will see from this that the great desideratum of the 
central-station system is, from the investors' point of view, 
the necessity of getting customers for your product whose busi- 
ness is of such a character as to call for a low maximum and 
long average use. This question of load factor is by all means 
the most important one in central -station economy. If your 
maximum is very high and your average consumption very low, 
heavy interest charges will necessarily follow. The nearer you 
can bring your average to your maximum load the closer you 
approximate to the most economical conditions of production, 
and the lower you can afford to sell your current. Take, for 
instance, summer and winter curves of the Chicago Edison 
Company. The curve of December 20, 1897, shows a load 
factor of about 48 per cent; the curve of May 2, 1898, shows a 
load factor of nearly 60 per cent. Now, if we were able in 
Chicago to get business of such a character as would give us a 
curve of the same characteristics in December as the curve we 
get in May, or, in other words, if we could improve our load 
factor, our interest cost would be reduced, an effect would be 
produced upon the other items going to make up the cost of 
energy, and we probably could make more money out of our 
customers at a lower price per unit than we get from them now. 

Many schemes are employed for improving the load factor, 
or, in other words, to encourage a long use of central-station 



28 ADDRESSES OF SAMUEL INSULL 

product. Some companies adopt a plan of allowing certain 
stated discounts, providing the income per month of each lamp 
connected exceeds a given sum. The objection to this is that 
it limits the number of lamps connected. Other companies 
have what is known as the two-rate scheme, charging one rate 
for electricity used during certain hours of the day and a lower 
rate for electricity used during the remainder of the day, using 
a meter with two dials for this purpose. Other companies use 
an instrument which registers the maximum demand for the 
month, and the excess over the equivalent of a certain specified 
number of hours monthly in use of the maximum demand is 
sold at greatly reduced price. The last scheme would seem par- 
ticularly equitable, as it results in what is practically an auto- 
matic scale of discounts based on the average load factor of the 
customers. It does not seem to be just that a man who only 
uses your investment, say, 100 hours a year should be able to 
buy your product at precisely the same price as the man who 
uses your investment, say, 3,000 hours a year, when the amount 
of money invested to take care of either customer is precisely 
the same. Surely the customer who uses the product on an 
average thirty times longer than the customer using it for only 
100 hours is entitled to a much lower unit rate, in view of the 
fact that the expense for interest to the company is in one case 
but a fraction per unit of output of what it is in the other. 

Suppose that the central-station manager desired to sell 
his product at cost, that is, an amount sufficient to cover his 
operating, repairs, and renewals, general expense, and interest 
and depreciation. He would have to obtain from the customer 
having the poorest load factor, as shown on the load chart, 
over four times as much per unit of electricity as it would be 
necessary for him to collect from the customer having the 
largest load factor. No one would think of going to a bank to 
borrow money and expect to pay precisely the same total 
interest whether he required the money for one month or for 
twelve; and for the same reason it seems an absurdity to sell 
electricity to the customer who uses it but a comparatively few 
hours a year at the same price at which you would sell it to the 



CENTRAL-STATION DEVELOPMENT 29 

customer using it ten hours a day and three hundred days a 
year, when it is remembered that interest is the largest factor in 
cost, and the total amount of interest is the same with the 
customer using it but a few hours a year as it is with the cus- 
tomer using it practically all the year around. 

THE COST OF MONEY 

I have dwelt thus at length on the question of interest 
cost in operating a central-station system, not alone for the 
purpose of pointing out to you its importance in connection 
with an electrical distribution system, but also to impress 
upon you its importance as a factor in cost; in fact, the most 
important factor in cost in any public-service business which you 
may enter after leaving this institution. Most of the businesses 
presenting the greatest possibilities from the point of view of an 
engineering career are those requiring very large investment 
and having a comparatively small turn-over or yearly income. 
Of necessity in all enterprises of this character, the main factor 
of cost is interest, and if you intend following engineering as a 
profession, my advice to you would be to learn first the value of 
money, or, to put it another way, to learn the cost of money. 

Before leaving this question of interest and its effect upon 
cost, I would draw your attention to the fact that while interest 
is by far the most important factor of cost, it is a constantly 
reducing amount per unit of maximum output in practically 
every central-station system. When a system is first installed, 
it is the rule to make large enough investment in real estate and 
buildings to take care of many times the output obtained in the 
first year or so of operation. As a rule the generating plant, 
from the boilers to the switchboard, is designed with only 
sumcient surplus to last a year or so. In the case of the dis- 
tributing system the same course is followed as in the case of 
real estate and buildings, with a view to minimizing the ultimate 
investment. Mains are laid along each block facing, feeders 
are put in having a capacity far beyond the necessity of the 
moment, consequently interest cost is very high when a plant 



30 ADDRESSES OF SAMUEL INSULL 

first starts, except, as I have stated, in the case of the machinery 
forming the generating plant itself. 

As the business increases from year to year the item of 
interest per unit of maximum output will constantly decrease 
in consequence, owing to the fact that each additional unit of 
output following an increase of connected load increases the 
divisor by which the total interest is divided. The result is 
that from year to year the interest cost of each additional unit 
of maximum output is a constantly reducing amount, and con- 
sequently the average interest cost of each unit of maximum 
output should, in a well-regulated plant, grow less from year 
to year until the minimum interest cost per unit is reached. 
This minimum interest cost is reached when the capacity of the 
whole system and the total units of output at maximum load 
are identical, although of course it will always be necessary to 
have a certain margin of capacity over possible output, as a 
factor of safety. 

CONSTANT REDUCTION IN THE COST OF ELECTRICAL ENERGY 

This same rule, although to a less extent, applies to the 
operating and general expense cost; that is, the cost other than 
interest. To particularize, the manager's salary and other 
administrative expenses do not increase in proportion to 
maximum output of station; therefore the cost of administration 
per unit of output, if the business is in a healthy condition, 
must be from year to year reduced. There are a great many 
other expenses that are not directly in proportion to output, 
and these follow the same rule. In a well-run plant the per- 
centage of operating expenses to gross receipts will stand even 
year after year, while the income per unit of output will be 
constantly reduced. This gives excellent evidence of the fact 
that the cost per unit of output is constantly being reduced, as, 
if it were not, the percentage of expenses to gross receipts would 
be increased in direct proportion to the reduction in price. 

Moreover, it should be borne in mind that there are many 
difficulties in the way of universal use of electrical energy from a 



CENTRAL-STATION DEVELOPMENT 31 

central-station system. It is the rare exception to find a house 
not piped for gas and water. In the case of the latter it is al- 
most invariably the rule that owners are compelled to pipe for 
water, under the sanitary code of the municipality. On the 
other hand, in a large residential district, it is the exception to 
find a house wired for electricity; consequently the output of 
electrical energy per foot of conductor is at the present time 
very low as compared with the output of gas per foot of gas 
pipe in any of the large cities. The expense of wiring (which 
must of necessity be borne by the householder) is large, and it is 
often a barrier to the adoption of electric illumination ; but as the 
rule to wire houses becomes more general, the output per foot 
of main will constantly increase, and therefore the interest per 
unit of output per foot of main will constantly decrease. This 
same rule will apply in the case of expenses of taking care of and 
repairing the distribution system, although to a less extent. 

If you will take into account these various factors constantly 
operating toward a reduction of operating and general-expense 
cost and interest cost, the conclusion must necessarily be 
forced upon you that the price at which electricity can be sold 
at a profit today is in no sense a measure of the income per 
unit which it will be necessary for central-station managers to 
obtain in the future. In 188182 it was difficult to make both 
ends meet with an income of 25 cents per kilowatt-hour; today 
there are many stations showing a substantial return on their 
investment whose average income does not exceed 7 cents per 
kilowatt-hour, showing 70 per cent reduction in price in less 
than two decades. 1 How far this constant reduction in cost, 
followed by a constant reduction in selling price, will go, it is 
difficult to determine; but if so much has been accomplished 
during the first twenty years of the existence of the industry, 
is it too much to predict that in a far less time than the succeed- 
ing twenty years electricity for all purposes will be within the 
reach of the smallest householder and the poorest citizen? 2 

1. The average income of the Commonwealth Edison Company in 1914 
was about 2.05 cents per kilowatt-hour. 

2. This prediction has been realized, substantially, in 1915, seventeen 
years after it was made. 



32 ADDRESSES OF SAMUEL INSULL 

GAS AND ELECTRICITY UNDER CONDITIONS OF 1898 

If you will trace the history of the introduction of gas as 
an illuminant you will find that it took a much longer time 
to establish it on a commercial basis than it has taken to estab- 
lish most firmly the electric-lighting industry. All the great 
improvements in gas the introduction of water gas, the econo- 
mizing in consumption by the use of the Welsbach burner have 
all been made within the time of those before me. When these 
gas improvements were put into effect the electric-lighting 
business was hardly conceived, and certainly had not advanced 
to a point where one could claim that it had passed the ex- 
perimental stage. Notwithstanding this, the cost of electrical 
energy has decreased so rapidly that today there are many 
large central-station plants making handsome returns on their 
investments at a far lower average income per unit of light than 
the income obtained by the gas company in the same commun- 
ity. In making my calculations which have led me to this con- 
clusion, I have assumed that 10,000 watts are equal to 1,000 
feet of gas. This comparison holds good, providing an incandes- 
cent lamp of high economy is used as against the ordinary gas 
burner. To make a comparison between electric illumination 
and incandescent gas burners, such as the Welsbach burner, you 
must figure on the use of an arc lamp in the electric circuit in- 
stead of an incandescent lamp, which is certainly fair when it 
is remembered that incandescent gas burners are, as a rule, used 
in places where arc lamps should be used if electric illumina- 
tion is employed. 

THE THRESHOLD OF A GREAT DEVELOPMENT 

With such brilliant results obtained in the past, the prospects 
of the central -station industry are certainly most dazzling. 
While the growth of the business has been phenomenal, more 
especially since 1890, I think it can be conservatively stated 
that we have scarcely entered upon the threshold of the develop- 
ment which may be expected in the future. In very few cities 
in the United States can you find that electric illumination 



CENTRAL-STATION DEVELOPMENT 33 

exceeds more than 20 per cent of the total artificial illumination 
for which the citizens pay. If this be the state of affairs hi 
connection with the use of electricity for illuminating purposes, 
and if you will bear in mind the many other purposes to which 
electricity can be adapted throughout a city and supplied to 
customers in small quantities, you may get some faint concep- 
tion of the possible consumption of electrical energy in the 
not-far-distant future. Methods of producing it may change, 
but these methods can not possibly go into use unless their 
adoption is justified by saving in the cost of production a 
saving which must be sufficient to show a profit above the 
interest and depreciation on the new plant employed. It is 
within the realms of possibility that the present form of generat- 
ing station may be entirely dispensed with. It has already been 
demonstrated experimentally that electrical energy may be 
produced direct from the coal itself without the intervention of 
the boiler, engine and dynamo-electric machine. Whether 
this can be done commercially remains to be proved. What- 
ever changes may take place in generating methods, I should, 
were I not engaged in a business which affords so many re- 
markable surprises, be inclined to question the possibility of any 
further material change in the distributing system. Improve- 
ments in the translating devices, such as lamps, may add 
enormously to the capacity of the distributing system per unit 
of light; but it does seem to me that the system itself, as origi- 
nally conceived, is to a large extent a permanency. Should 
any great improvements take place in the medium employed 
for turning electrical energy into light, the possible effect on 
cost, and consequently selling price, would be enormous. 



STANDARDIZATION, COST SYSTEM OF 
RATES, AND PUBLIC CONTROL 1 

CALLING to order the annual convention of your asso- 
ciation, my dual capacity causes me some embarrass- 
ment. I am in doubt whether as president to enlarge 
upon the great growth of this association since its formation 
in this city on February 25, 1885, or whether as a resident here 
to dwell at length upon the marvelous growth of the city in 
which we meet. Chicago and the industry with which we are 
identified have a somewhat close connection. The growth of 
the former, if measured from the point of view of the rapidity 
with which history is made, is, so to speak, the product of 
yesterday. The electrical industry, or rather that portion 
of it with which we are associated, is but little more than the 
product of today. If the growth of this city and that of our 
own industry are as great during the next thirteen years as the 
progress that they have achieved since the date of your first 
meeting here, I am sure that both the citizens of Chicago and 
the members of your association will have every reason to con- 
gratulate themselves. Speaking for those of my friends con- 
nected with the electrical industry in Chicago, and also for 
myself, I can assure you that it affords us very great pleasure 
to welcome you at this convention, and the fact of your meeting 
in this my home city enhances not a little my high appreciation 
of the privilege of presiding on this occasion. 

1. Mr. Insull was president of the National Electric Light Association in 
1897-1898. This organization is the great representative society of the elec- 
tric-service interests of the United States. At the convention held in Chicago 
on June 7, 1898, President Insull delivered the address which forms this chap- 
ter. It was a notable contribution to the literature of the art at that time, and 
it has lost little of its savor with the passage of the years. It may be remarked 
that this is the first of these papers in which is enunciated the "exclusive" or 
monopoly doctrine which was later advocated so earnestly by Mr. Insull. This 
address was prepared in advance and read from manuscript. 

34 



PUBLIC CONTROL ADVOCATED 35 

The officers of your association have had in mind, in pre- 
paring a programme for this convention, the importance of 
bringing before you subjects of interest in connection with 
central-station management; and the papers to be read at our 
various sessions and the topics mentioned for discussion cover 
such a wide range that it would seem undesirable for me to 
occupy much of your time by way of introduction. The various 
gentlemen who have so kindly consented to read papers will 
deal with such important questions as the cost of generating 
and distributing the product which we manufacture, trans- 
former economy, and the rival claims of alternating currents 
and direct currents as means of distribution. The many prob- 
lems which you have to solve in connection with the question 
of public lighting, and the cost of producing electrical energy 
by water power, will also be discussed. 

STANDARD VERSUS SPECIAL MACHINERY 

A matter that has called forth during the last year con- 
siderable discussion is the question of the use of standard 
apparatus and the tendency towards the specification of special 
machinery on the part of electrical engineers. This course 
is not by any means confined to large work, but is followed by 
some engineers whether they are designing a small isolated plant 
or are projecting a large, modern central station. It would seem 
to me to be of paramount importance to the manufacturer and 
user that both should co-operate in eliminating, as far as 
possible, from the business the necessity of building and using 
special types of machinery. This can only be done by the 
adoption of standard specifications for various standard types 
of apparatus. A committee of the American Institute of 
Electrical Engineers has already taken this subject under 
consideration, and I believe that we shall be serving alike the 
interests of the manufacturers and users of electrical apparatus 
if we take some action with a view to co-operating with the 
Institute and other bodies in this matter. In drawing atten- 
tion to this subject, I speak with an appreciation of the positions 
of both manufacturer and user, having had more or less con- 



36 ADDRESSES OF SAMUEL INSULL 

nection with the manufacture of electrical apparatus and the 
manufacture of electrical energy. 

Constant duplication of parts, resulting in constant duplica- 
tion of a given piece of machinery, means, as any manufacturer 
will tell you, constant reduction in cost. Variation from a 
given type means increased cost and even the wiping out of an 
apparent profit. In the last year or so there has been a great 
deal of discussion in England prompted by the success of Ameri- 
can manufacturers in obtaining large contracts for electric- 
traction work in Great Britain, and the inquiry has often been 
made, How is it possible for American electrical manufacturers, 
with high wages against them, to compete with English builders, 
whose scale of pay to their workmen is on a very much lower 
basis? If you will examine into the amount of electric-traction 
machinery manufactured in this country under a system of 
constant duplication and the use of special tools, and then 
visit the electrical establishments on the other side of the 
water, and note the tendency there towards specializing each 
particular job, you will soon recognize the reason for the lower 
cost here. In America this class of work is largely designed 
by the manufacturer, and, as a natural result, is the dupli- 
cate of something already produced; while on the other side 
of the Atlantic the builder of the machinery works from the 
plans of the electrical engineer, which necessitates his producing 
something different to fill each different contract. In one 
case, the machinery is really manufactured; in the other case, 
the builder runs a jobbing shop. 

Unfortunately, during the last few years American users 
of electrical apparatus have departed somewhat from the 
pursuance of what is really a fundamental principle of Ameri- 
can manufacture, namely, the use of existing types, which are 
turned out in large quantities with special tools, with a view to 
the lowest possible cost of production. The electrical engineer 
for the purchaser has been permitted to draw up specifications 
that have tended toward the specializing of apparatus, neces- 
sarily interfering with rapid manufacture and low cost of the 
product. The disadvantage to the manufacturer is apparent. 



PUBLIC CONTROL ADVOCATED 37 

It is turning our large electrical works from manufacturing 
establishments into jobbing shops, cutting down their produc- 
tiveness, increasing their labor cost and lengthening the time 
that it takes to produce a given article. Looking at it, there- 
fore, from the point of view of the manufacturer, the pro- 
ducing power of his plant is reduced, and consequently his 
interest and general-expense cost is higher; his labor cost is 
increased; and if he finds himself unable to increase his selling 
price, his shop must be run at a loss instead of at a profit. 

The user is necessarily interested in low cost of production 
on the part of the manufacturer, as he cannot expect to pur- 
chase apparatus except at prices that yield a return to the 
maker. From this point of view alone it would seem to me to 
the interest of the user that he should co-operate with the manu- 
facturer with a view to standardizing apparatus, eliminating 
unnecessary variations from a given type and providing specifi- 
cations for machinery calling for a given capacity at a given 
efficiency. Such a course would lead to low cost of manufac- 
ture, and consequently low selling price, coupled with rapid 
production. 

WHY STANDARDIZED APPARATUS SHOULD BE FAVORED 

Another objection to special apparatus is the expense and 
delay in obtaining duplicate parts in case of breakdown. The 
fear of delay under such circumstances often necessitates the 
user's carrying the duplication of his plant to a point entirely 
unnecessary when standard apparatus is used. Capital in- 
vestment, and consequently interest cost, is thus increased, not 
only by the purchase of apparatus that of itself is expensive 
to build, but also by the duplication of investment which must 
of necessity follow. 

A further point that should be borne in mind in connection 
with the lack of standard specifications is the opportunity 
that it gives to the unprincipled manufacturer to dispose of 
his second-rate apparatus to the uninitiated. We talk of a 
machine having a given "capacity" or rating; but under what 
conditions should it operate to develop this rating, and how 



38 ADDRESSES OF SAMUEL INSULL 

often does it occur that a dynamo-electric machine is rated 
entirely too high and at the cost of its efficiency? How much 
miscellaneous material used in connection with the industry is 
absolutely unfitted for the purpose for which it is sold? Surely, 
all of us, manufacturers and users, are interested in maintain- 
ing the highest possible standard of work and eliminating alike 
from our central-station systems and the installations for our 
customers worthless appliances whose only recommendation 
is their apparent cheapness, whereas, as a matter of fact, they 
are really the most expensive that can be bought, because they 
are unfitted for the purposes for which they are intended. 

A proper consideration of this subject would not embrace 
alone the apparatus we are ourselves in the habit of buying 
for use in connection with our plants, but also the appliances 
used in connection with customers' house wiring. It should 
be borne in mind that faulty apparatus, from one cause or 
another resulting in a stoppage of the service of one or more 
customers, is, in the mind of the user of electricity, set down to 
the unreliability of the system as a whole. A central-station 
customer seldom discriminates between a contractor who 
supplies a worthless device and a company supplying him with 
energy. Standard specifications should therefore cover, not 
alone the machinery used, but also the devices and material 
forming part of a customer's installation. This association 
has addressed itself at various times to the consideration of 
questions in connection with house wiring, and has co-operated 
with the National Board of Fire Underwriters and other 
bodies with a view to establishing rules to be followed by 
contractors. I strongly recommend that this matter be taken 
up on a broader basis than heretofore, and that in conjunction 
with the technical societies we invite the co-operation of the 
electrical manufacturers, with a view to standardizing apparatus 
and the specifications therefor, whether for use in the central 
station itself or in connection with the distributing system. 1 

1. In view of the co-operative deliberations of the electrical and insurance 
interests of the United States in relation to less expensive house wiring (possi- 
bly by the use of concentric wiring) and other subjects, in progress as this 
book is put to press early in 1915, these utterances of seventeen years ago are 
particularly significant and interesting. 



PUBLIC CONTROL ADVOCATED 39 

I do not want my remarks on this subject to be taken as in 
any way censuring the many electrical engineers who have by 
their special training and natural ability done so much to 
develop the industry with which we are connected. From my 
experience I am satisfied, however, that, from the point of 
view of the user, the designing engineer who adapts his require- 
ments to the standard apparatus of a first-class manufacturer 
is able to produce a plant of more satisfactory character, and 
more economical to operate, than that designed by those en- 
gineers who are influenced by the desire to use machinery that 
they can point to as of their own design. 

LAMP SPECIFICATIONS 

The consideration of the subject of standard specifications 
would naturally include the preparation of specifications with 
relation to the manufacture of incandescent lamps. For 
several years past a committee of this association has had this 
subject under consideration. It has been found practicable 
by a number of large central-station companies, connected 
with another association 1 and buying from one manufacturer, 
to purchase their lamps under specifications that provide for 
the testing of samples of the product of the factory, the payment 
for lamps supplied being based on the results of the tests. It 
seems to me that it would be possible to adopt standard specifi- 
cations under which our members could purchase their lamps 
from any reputable lamp manufacturer. The importance of 
this matter will be appreciated when it is remembered that the 
cost of lamp renewals per unit of output exceeds $1 per ton of 
the cost of fuel in operating a central station with the most 
modern steam plant. 

SELLING PRICE BASED ON COST 

It is of prime importance to central-station managers that 
they should sell their product, electricity, to the greatest num- 

1. No doubt the Association of Edison Illuminating Companies and the 
General Electric Company are referred to here. 



40 ADDRESSES OF SAMUEL INSULL 

her of consumers at the lowest possible price, and yet obtain a 
reasonable profit. For a number of years the basis of charge 
on the part of most companies has been a given unit price, with 
discounts for quantity. In the early days of the business some 
companies were in the habit of charging a fixed price per lamp 
per month, having no control whatever over the use of the 
product, but being necessarily responsible for the increased 
operating expenses caused by the wastefulness of customers, 
who could hardly be expected to economize, inasmuch as they 
paid exactly the same price for the use of light whether they 
burned it one or twenty-four hours a day. A majority of the 
companies following this method realized at an early date the 
absurdity of distributing that for which they were not paid, and 
as a result I presume we can fairly assume that the electric- 
lighting business (with the exception of arc-light service) is run 
almost universally on a meter basis. 

If you will make a careful examination of the factors enter- 
ing into the cost of manufactured electricity, you will realize 
that interest is by far the most important element, and that 
this item varies very considerably with the different classes 
of service furnished by a central-station company. The 
interest factor in cost depends upon the yearly average con- 
sumption of your product by the customer; or, to put it another 
way, you can figure your interest on the basis of so much per 
unit of output at maximum load. 

For instance, take the two probably extreme classes of 
customers to whom the central-station company supplies 
electricity for lighting purposes. On the one hand, you have 
an office building whose tenants use artificial illumination for 
only a short space of time each day and only during the winter. 
On the other hand you have a basement customer whose use 
of your product averages nearly one-half of the day of twenty- 
four hours during the whole year. Your investment to take 
care of each of these customers is practically the same; there- 
fore your total interest cost must be the same in both cases; 
but if you distribute this interest cost over the actual units 
consumed, you will find that the tenant of the office building 



PUBLIC CONTROL ADVOCATED 41 

costs you for interest per unit of energy sold many times more 
than does the occupant of the basement. There are of necessity 
as many different grades of customers between the two ex- 
tremes I have mentioned as there are different classes of 
business and different characters of structures in which these 
businesses are conducted. Surely, if the cost of production 
varies according to the different conditions under which your 
customers use your product, it is but fair that the selling price 
per unit should vary correspondingly. If it does not, you, of 
necessity, encourage the use of electricity by customers whose 
business is unprofitable to you, and discourage the use of your 
product by customers whose business at a lower price would 
yield you a fair return. 

In past conventions the question of how to improve the 
day load for the purpose of raising the average output, what 
classes of business other than lighting should be encouraged 
to achieve this result, and the price at which we can afford to 
sell current to the operators of these different lines of business, 
have come up for discussion. At the last convention the real- 
ization of the fact that great differences exist in the elements 
governing the cost of product for different classes of lighting 
customers was ably presented by Mr. Wright, and he pointed 
out that the improvement of your load factor, the broadening 
of your curve, and the rendering less acute of your peak, are 
matters within your own adjustment, provided that you will 
realize, in considering cost with a view to making a selling price, 
that conditions are so dissimilar that the expense to you per 
unit of supplying two customers in the same block is likely to be 
widely different. 

Various plans have been adopted by a comparatively small 
number of companies to meet the conditions as we now know 
them to exist. Some companies have adopted the scheme of 
allowing certain special discounts provided the income per 
month per lamp connected exceeds a certain amount. Other 
companies charge one rate for energy used during certain speci- 
fied hours of the day and a much lower rate for that used during 
the remaining hours of the day. A third method is a system 



42 ADDRESSES OF SAMUEL INSULL 

of discounts based upon the total consumption of energy during 
a given period, considered in connection with the maximum 
consumption at any time during the same period. 

These various methods all have the same object in view 
the meeting of the conditions of each individual customer, and 
yet at the same time earning a fair return on all of the invest- 
ment provided for all of your customers. 

In discussing this matter I have referred to interest cost 
alone, because it forms so large a proportion of the total cost; 
but you will find that this same principle enters into a number of 
the other elements that go to make up your total cost. It would 
therefore appear to me that in considering the cost of generating 
electricity you should bear in mind that a large proportion of 
the items that go to make up the total are within your own 
control, and their amount per unit of output depends very 
largely upon the methods adopted in selling your product. 

PUBLIC CONTROL AND PRIVATE OPERATION 

A subject of growing importance to a number of our mem- 
bers is the question of the public ownership and operation of 
the undertakings now operated by electric-lighting companies. 
The agitation in connection with this subject has called forth 
a great deal of discussion, partly by those interested in it simply 
with a view to extending the influence of political parties, and 
partly by serious disinterested thinkers who believe that the 
best interests of the greatest number are to be obtained by the 
creation of a municipal socialism, which, if carried to its logical 
conclusion, must ultimately result in municipalities perform- 
ing, with others, such public-service work as we are engaged in, 
and also in producing the food we eat and the clothes we wear. 

To those occupied in the management of electric-lighting 
properties it does not seem possible that the movement in favor 
of municipal operation of electric-lighting plants, based upon 
the assumption that a municipality can produce electricity 
cheaper than, or even as cheap as, a private corporation, is 
well founded We all realize, from the close attention we have 



PUBLIC CONTROL ADVOCATED 43 

to give to our own affairs, that self-interest and the necessity 
of getting a return on our investment are the first essentials 
to the economical administration of large enterprises. While 
I do not pretend to assert that electric-lighting companies are 
beyond reproach, I wish to point out that many of the evils 
complained of as pertaining to corporate management are the 
direct results of the enforcement of unwise conditions through 
legislative action. Ill-advised efforts are made often by legisla- 
tive bodies to secure advantages in the direction of control 
which cannot be obtained without giving an equivalent in 
protection to the industry. This causes the investor to feel 
that his property is being attacked, and compels him to resist 
such legislation. The result is a feverish agitation, crimination 
and recrimination between the would-be improvers of municipal 
government and the owners of corporate properties without 
reaching a conclusion satisfactory to either. 

The fallacy of the so-called reformer's theory results from 
looking only at what he calls the injurious effects of corporate 
management without taking into account its indisputable 
benefits. He does not seek for the cause of the trouble. If 
reformers will take accurate account of all the points in the 
problem, they will discover that the evils complained of re- 
sult from errors in legislation designed to determine the rela- 
tions between municipal bodies and electric-lighting companies. 
It seems to me that the claim that municipal operation is the 
universal cure for all diseases for which electric-lighting com- 
panies are supposed to be responsible merely proposes the sub- 
stitution of political in the place of industrial management. 
This raises the question, Is the administration of municipal 
affairs in the various cities throughout this country so econom- 
ical, as compared with the management of private industries, 
and the class of service rendered so efficient, as to justify the 
increasing of the burdens already imposed upon municipal 
government? It appears to me that a correct division of 
power and responsibility requires political government merely 
to control private industrial management. Where political 
government and industrial management are merged into one 



44 ADDRESSES OF SAMUEL INSULL 

interest, the power of control is seriously impaired, since a 
political administration cannot be reformed without overturn- 
ing the party in power. 

I cannot bring myself to the belief that the citizens of this 
country are in fact opposed to large aggregations of capital in 
corporate form, as such aggregations are absolutely necessary 
to the operation of all great undertakings by private enter- 
prise. It is as impossible to operate such vast affairs with in- 
dividual capital, as a personally owned business, as it is for us 
to live without municipal, state and national governments. 
The misunderstandings that from time to time occur between 
communities and the managers of electric-lighting companies 
will, to my mind, disappear entirely if the relations between 
the two are correctly founded on the basis of public control, 
with corresponding protection to the corporations operating 
this industry. It would seem to me to be a very proper function 
for this association to address itself to educating the public 
to a definite legislative policy that will be fair to the municipal- 
ities, securing to the public the best service at the lowest pos- 
sible price, and protecting corporations by giving them fran- 
chises which, while conserving municipal control, will insure 
to the investor the permanency of the undertaking. 

COMPETITION is NOT THE TRUE REGULATIVE FORCE 

It is supposed by many who discuss municipal affairs that 
the granting of competitive franchises for public-service work 
is the true means of obtaining for users the lowest possible 
price for the service rendered, where, as a matter of fact, the 
exact opposite is the ultimate result. This is proved by results 
in all large cities where the most severe competition has taken 
place. Acute competition necessarily frightens the investor, 
and compels corporations to pay a very high price for capital. 
The competing companies invariably come together, and the 
interest cost on their product (which is by far the most impor- 
tant part of their cost) is rendered abnormally high, owing 
partly to duplication of investment and partly to the high price 



PUBLIC CONTROL ADVOCATED 45 

paid for money borrowed during the period of competition. 
The selling price of a service should be based on its cost, and in 
any business such as public work, where the investment is large 
and the annual turnover is comparatively small, if the item of 
interest be necessarily augmented, it must be reflected in the 
price paid by public and private users. 

While it is not supposed to be popular to speak of exclusive 
franchises, it should be recognized that the best service at the 
lowest possible price can only be obtained, certainly in con- 
nection with the industry with which we are identified, by 
exclusive control of a given territory being placed in the hands 
of one undertaking. In most European countries public-ser- 
vice operations enjoy exclusive franchises, under proper con- 
trol, and are able to obtain capital for their undertakings at 
the lowest commercial rates, thus materially affecting the cost 
of their product, of which interest, as I have already stated, is 
necessarily so great a part. In order to protect the public, 
exclusive franchises should be coupled with the conditions 
of public control, requiring all charges for services fixed by 
public bodies to be based on cost plus a reasonable profit. It 
will be found that this cost will be reduced in direct proportion 
to the protection afforded the industry. The more certain this 
protection is made, the lower the rate of interest and the lower 
the total cost of operation will be, and, consequently, the lower 
the price of the service to public and private users. If the 
conditions of our particular branch of public service are studied 
in places where there is a definite control, whether by com- 
mission or otherwise, it will be found that the industry is in an 
extremely healthy condition, and that users and taxpayers 
are correspondingly well served. 

COMPENSATION FOR FRANCHISES 

When prices for services are based on cost, it matters not 
whether or not, in the establishment of a system of legislative 
control, provision is made for paying a portion of the receipts 
direct to the municipality. If the public demands a percentage, 



46 ADDRESSES OF SAMUEL INSULL 

surely we can afford to pay it, as it would simply be added as 
an item of expense, on which our selling price would be figured. 
If the public does not demand a percentage, this selling price 
would be proportionately less. It is simply a question as to 
whether our municipal bodies prefer to raise a portion of their 
income by taxing their citizens through the agency of public- 
service corporations, or whether they prefer to raise that por- 
tion of their income by collecting it direct from citizens them- 
selves. Revenue raised by a percentage on gross receipts of 
the electric-lighting business would, at the present time, how- 
ever, seem to be somewhat unfairly obtained in cases where the 
selling price is subject to legislative control and based on cost of 
service, as the result would be that a small minority of citizens 
using electricity would be forced to contribute largely to the 
public revenue, whereas the benefits enjoyed therefrom would 
be to the advantage of the whole community. 

TAKING PRIVATE PROPERTY FOR PUBLIC USE 

Another point that should be included in a proper scheme of 
public control is a condition under which the municipality would 
have the right to purchase the undertaking. Such a right 
should include a direct obligation on the part of the municipality 
to purchase the property at a fair price whenever it is thought 
desirable that the industry should be operated by the municipal- 
ity. The possibility of the exercise of the right of purchase by 
the municipality would of itself make it to the interest of the 
owners of the property to do their full duty in their relations 
to the public. On the other hand, if a community licenses a 
corporation to perform a certain public service, and if that cor- 
poration invests money and develops its business, surely it is 
unfair for that community to go into the same line of public- 
service work itself without first purchasing the existing plant. 
If this is not done, the value of private property will be de- 
stroyed, without just compensation being made therefor, in an 
attempt to secure a public benefit. I do not believe that the 
people as a whole are so unfair as to demand that such a 
course shall be taken. 



PUBLIC CONTROL ADVOCATED 47 

My recommendations on the subject, which I have just 
presented, are by no means original. Most public-service cor- 
porations in Great Britain are run on practically the bases 
indicated, and in more than one state in the Union corporate 
legislation has taken the same direction. 

I would summarize in just two sentences the position that I 
think we should take on this subject : 

First. Franchises granted to public-service corporations 
should secure them the same degree of protection in their rights 
to their property as is enjoyed by other investments. 

Second. Public control of charge for service, based on 
cost plus a reasonable profit, and eliminating the factor of 
competition, is the proper safeguard for the interests of users, 
taxpayers and investors. 



POSSIBILITIES OF THE CENTRAL-STATION 
BUSINESS 1 

THE FIRST central-station installation which I ever saw 
was the first one that was ever built. It was installed 
at Menlo Park, N. J., by Thomas A. Edison in the winter 
of 1880-81 for the purpose of demonstrating the success of what 
was popularly called the subdivision of the electric light. 

The generating station was composed of nine or ten 60-light 
dynamos and was situated in a building beside Mr. Edison's 
brick machine shop at his laboratory. His workshops and 
laboratory and his own residence and those of his assistants 
were lighted by incandescent lamps. The system employed was 
the two-wire multiple-arc system of mains and feeders, and 
the distribution system was underground. There were motors 
at work in Mr. Edison's laboratory, and, in fact, all of the essen- 
tial features of central-station generation and distribution were 
shown. 

It was on the evening of the 2d of March, 1881, 2 that I paid 
my first visit to Menlo Park. I had arrived in New York from 
England the day before, having come on the invitation of 
Mr. Edison to act as his private secretary. We had heard all 
kinds of gossip in London about the wonderful things that were 
being done at Menlo Park in the way of practical electric-light- 
ing work. Mr. Edison had been writing to his English friends 

1. Although often solicited, Mr. Insull has made it an almost invariable 
rule not to write articles for the periodical press. Yielding to the importunities 
of a friend, he did, however, prepare "Some Recollections of Central-Station 
Development" for the Twentieth Anniversary Number of the Western Elec- 
trician. This article was published on September 28, 1907, and extracts from 
it are given here. At that time, as will be seen, Mr. Insull had formulated 
pretty clearly his conception of the central station as the wholesale source of 
electricity supply for all the needs of its community. 

2. For correction in this date see note on page xxvi. 

48 



WHOLESALING OF ELECTRICITY 49 

for two years prior to the date of my arrival in New York telling 
of his success, but as we had had no demonstration of it on the 
other side of the water and as scientists on both sides of the 
Atlantic expressed their doubts as to the results of Mr. Edison's 
experimental work, my natural desire when I arrived here was 
to pay an immediate visit to Menlo Park and cable my English 
friends that I had actually seen Mr. Edison's central-station 
system at work. 

So far as the service rendered, this first experimental plant 
at the birthplace of the central-station industry was as perfect 
as the service now given by any of the central-station companies 
in our large cities. And although, instead of using in the gen- 
erating station steam turbo-generators of a capacity from 10,000 
to 15,000 kilowatts, 1 small bipolar machines of from six to ten 
kilowatts capacity were used, yet the main essentials of central- 
station engineering, as practiced today, were shown in this 
original and successful effort at central-station building. There 
was the multiple-arc distribution system with feeders running 
from the generating station to various points in the system of 
mains in order to equalize the pressure, incandescent lamps and 
motors running in multiple, and the street wiring system thor- 
oughly insulated and laid underground; in fact, all the essentials 
of modern central-station distribution. 

DIVERSIFIED DUTIES OF MR. EDISON AND His ASSISTANTS 

At the same time and running from the same generation 
station Mr. Edison had in operation about a mile of electric 
railway, the track being partially insulated and used for con- 
ducting the current. A speed of 42 miles an hour was attained, 
and over 5,000 people rode on this experimental electric railway. 

I can well remember the early experiences in central-station 
construction in New York in the winter of 1881 and the summer 
of 1882. The men familiar with the work could at that time 
be counted on the fingers of one hand. There were Mr. Edison 
and three or four assistants. 

1. Eight years later, in 1915, this would have been written 25,000 to 
35,000 kilowatts. 



50 ADDRESSES OF SAMUEL INSULL 

After Mr. Edison got through with his experimental work 
at Menlo Park, he and his assistants had to pick out the terri- 
tory in New York for central-station distribution, decide on 
the generating capacity necessary and the size of conductors 
required. Then, after the general specifications for the work 
had been prepared, it was necessary that there should be pro- 
vided factories in which to build the generating machinery and 
underground conductors needed; also supplies, such as lamps, 
sockets, switches, meters, etc. All these establishments had 
to be started and organized and the machinery produced and 
put in place and the necessary central-station operating force 
taught to operate and take care of the central-station system. 

This work all of it had to be done by a few men whose 
only experience was that gained in demonstrating experiment- 
ally at Menlo Park Mr. Edison's inventions and ideas for 
central-station work. 

During the building of the New York central-station system 
I was mainly engaged in the daytime in looking after Mr. 
Edison's business affairs. The laying of underground conduc- 
tors used to take place at night, and the work of laying was 
superintended by Mr. Edison and Mr. John Kruesi, the latter 
being occupied in the day in manufacturing the conductors, or, 
as they were then known, "Kruesi tubes.'* I was in the habit 
of assisting them at night, my main duty being to sit on a street 
corner and watch a galvanometer used in testing the tubes for 
insulation. 

ALTERNATING-CURRENT AND THREE- WIRE DEVELOPMENT 

While the direct-currect business was being exploited by the 
Edison companies, the Westinghouse Electric Company and 
the Thomson-Houston Electric Company were engaged in 
pushing the alternating-current business and using as a basis 
for it the old arc-light companies which in a number of cities 
had been formed mainly by the Brush Company for doing city 
lighting. For a number of years there was the most heated 
and acrimonious discussion between the champions of the two 
different forms of current (direct and alternating) ; but all this 



WHOLESALING OF ELECTRICITY 51 

has long since passed away, and current of both descriptions 
is being used by the large companies at the present time; in 
fact, among the largest manufacturers of alternating current 
in the country are the old Edison local companies, which have 
always kept the lead in connection with central-station develop- 
ment. 

Some of the earliest three-wire central-station installations 
with overhead conductors were made at Sunbury, Shamokin 
and Mt. Carmel, Pa., and at Piqua, Ohio, the early three-wire 
underground systems in the smaller cities being laid in Brockton, 
Fall River and Lawrence, Mass., Rochester and Newburgh, 
N. Y., and Detroit, Mich. Among the larger cities, Brooklyn, 
Boston and Philadelphia had Edison three-wire plants in 
operation before any attempt was made to install large central- 
station three-wire plants in the West. It was not until 1887 
that the Chicago Edison Company was organized by the men 
who originally controlled the Edison light and power patents 
for Illinois and some of the surrounding states. The Chicago 
Edison Company started with a capital of $500,000. 

LATTER-DAY DEVELOPMENT 

In later years, the old rivalries having passed away, the 
Edison and alternating-current plants have consolidated, as 
a rule, into one organization in each city, much to the advantage 
of the public in the direction of lower prices and better service, 
and to the investor in a better return on money invested, owing 
to the stoppage of the duplication of investment and organiza- 
tion. 

Today in the cities of the first rank the central-station 
business has got to the point of a vast manufacturing business, 
the tendency being to install large turbo-generators of from 
10,000 to 15,000 kilowatts capacity, producing high-tension 
alternating current, which is transmitted to rotary substations, 
where it is transformed into direct current of various pressures 
dependent on whether it is to be used for electric-light and 
industrial-power purposes or street-railway work. In other 



52 ADDRESSES OF SAMUEL INSULL 

cases the substations are composed of step-down transformers 
to reduce the voltage to that ordinarily used for alternating 
electric light and power distribution. 

The experiences of the last few years have shown very dis- 
tinctly that if the central-station companies of the large cities 
are to maintain their positions, they must go more and more 
into the wholesaling of electricity to large users, such as street- 
railway companies, elevated-railway companies, and possibly 
later on to the larger transportation companies of the country. 

ALL ELECTRICAL ENERGY FOR A GIVEN AREA SHOULD BE 
PRODUCED BY ONE ORGANIZATION 

There is no business that I know of that is benefited more 
than the central-station business in the way of reduced cost of 
production by the increased amount of output. The intro- 
duction of the steam turbine is especially conducive to the 
economical production of electrical energy in very large quan- 
tities, both from a capital and operating point of view; and I 
look forward with confidence to the day when the electrical 
energy required in each of our large cities will be produced under 
one organization for each city, with a few large generating sta- 
tions for the production of alternating current, the energy being 
converted into whatever form may be best adapted for the pur- 
poses for which it is required. 

A canvass of any of the central blocks of buildings in any of 
our large cities will show an amount of investment in power- 
producing machinery out of all proportion to that which is 
really required to render the service demanded within a given 
territory. As these plants deteriorate and go out of use, cen- 
tral-station connections are taking their place, leading to a 
saving alike of capital expenditure and operating expenses. 

The same remark will apply to a canvass of the power facili- 
ties of the various companies using electrical energy, such as the 
street-railway companies, the elevated-railway companies and 
the interurban-railway companies, in any given territory. 

It is easy of demonstration that the most economical thing 



WHOLESALING OF ELECTRICITY 53 

to do is to produce all the electrical energy required in a given 
territory under one organization; and the central-station com- 
pany that works toward this end will, in my opinion, show a 
far greater return on the money invested by its stockholders and 
be able to quote a lower price to its customers than the company 
which undertakes to do the purely retail electric-light and in- 
dustrial-power business of the community, as the latter forms 
but a small portion of the possible business offering. 



ELUCIDATION OF ELECTRIC-SERVICE 
RATES FOR BUSINESS MEN 1 

THIS subject, instead of being dealt with in a summary 
way as some have suggested, has occupied the attention 
of the legislative department of the city government 
for more than two years. It came up in Mayor Dunne's 
administration, when an ordinance was passed by the City 
Council and vetoed by the Mayor, though it had been adopted 
after months of discussion and months of investigation, and 
had met with the general approval, I think, of the community. 
It did not, however, happen to meet with the approval of Mayor 
Dunne. That veto, I think, was rendered in June, 1906. 
Late in the autumn of 1906 Mayor Dunne asked of Marwick, 
Mitchell & Co., chartered accountants of this city and New 
York, their opinion as to what should be done in relation to an 
investigation of the rates of the then Commonwealth Electric 

1. Nearly ten years elapsed between the latest preceding public appear- 
ance of Mr. Insull, as recorded in this book, and the occasion of this speech. 
The decade was a busy and notable one in the electrical history of Chicago. 
The historic Fisk Street generating station was put in operation in 1903. Here 
the large turbo-generator units which have revolutionized the methods of 
generating electricity had their first trial, thanks to Mr. Insull's boldness and 
initiative. This was the first electric generating station in the world to be 
equipped exclusively with steam-turbine generating units, and it became 
famous. The Commonwealth Electric Company and the Chicago Edison 
Company, of both of which Mr. Insull was president, and both of which, under 
his direction, had absorbed other companies, were consolidated in the Com- 
monwealth Edison Company in 1907. (It may be stated here, as a matter of 
record, that Mr. Insull was elected president of the Commonwealth Edison 
Company at its formation, and that he still occupied that position when this 
book was published.) The great work of supplying the diversified electrical 
needs of the city from one source was well under way. Large contracts had 
been made with surface and elevated railway companies for supplying elec- 
tricity at wholesale rates. On March 7, 1908, a contract ordinance fixing rates 
was pending between the Mayor and City Council of Chicago and the Com- 
monwealth Edison Company, and it was discussed by a number of gentlemen 
at a luncheon of the City Club of Chicago on the date mentioned. One of these 
was Mr. Insull, and a condensed report of his remarks is given here. 

54 



RATE-MAKING EXPLAINED 55 

Company and the Chicago Edison Company. Marwick, 
Mitchell & Co., in their report, if I am correctly informed, re- 
viewed the rates of the two companies and pronounced them 
reasonable, advising Mayor Dunne that to make an investiga- 
tion into their affairs even if he had the right to make it 
would be expensive and entirely unnecessary. And this report 
was rendered, gentlemen, by the firm of accountants who 
would have been employed and would have made money out of 
such an investigation. I don't suppose that Mayor Dunne, 
after his veto, would have cared to publish that as a reason for 
not taking any further action. At any rate, nothing further 
was done until the present administration 1 came into office, 
and the Mayor drew attention to the consolidation of the 
Edison and Commonwealth companies, and advised the gas, 
oil and electric-light committee of the Council to take the matter 
up. They have been at work on it more or less ever since, so 
that instead of being only a few months old, this ordinance 
has received the attention of the authorities practically during 
a period of two years. 

COST OF ELECTRIC LIGHTING DECREASED WHILE COST OP 
OTHER COMMODITIES INCREASED 

Now, it is a simple proposition, gentlemen. It is simply a 
question of getting a fair return upon a given investment. We 
do not want anything more. The company has been in this 
community longer than I have, but I have been in it long enough 
to look around me and see at least fifty men here who know 
full well that all we are looking for, and all we get, is such 
return on our investment as no man in this room would accept 
on his private business. 

Some of you have seen this chart (Fig. 1) in the newspapers 
and in the street cars. It was put out, gentlemen, for the 
purpose of getting business. I presume I have spent, from first 
to last, $20,000 in advertising that curve. Our rates in 1896 
were on about an average with the rates of all the companies 

1. That of Mayor Fred A. Busse, deceased. 



56 



ADDRESSES OF SAMUEL INSULL 



130 
120 
110 

100 
90 
80 

60 
50 

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-* SERVANTS 


WAGES 


130 
120 
110 

100 
90 
80 
70 








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HRACIT 
P 


E COAL 








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ELECTRIC 
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96 1897 1898 1899 1900 190X 1902 1903 1904 1905 1906 1907 1908 1909 



Fig. 1. Decrease in Cost of Electric Light While Cost 
of Other Staples Increases 



96, 




468 
P.M. 



10 12 



? ig. 2. Load Diagrams of Commonwealth Edison 
Company, 1907-1908 



RATE-MAKING EXPLAINED 57 

on both sides of the Atlantic. Practically nothing at that 
time was known about the cost, or the principles governing the 
cost, of electrical energy. We started in and, while we have 
not that reputation here judging from one or two of the 
newspapers outside of Chicago we have the reputation of 
being the pioneers in low prices for electricity. I have just this 
last week come back from a hurried trip to London, and while 
I was on the other side, as is usually the case, I was introduced 
to everybody as the man who was furnishing electrical energy 
cheaper than any one else in the world. It was, therefore, 
probably very good discipline to come back and have the size 
of my cranium reduced by reading the criticisms that have 
been passed on our rates during the last week since my return. 
This chart shows a reduction of between 50 and 60 per cent 
between 1896 and 1906, covering a period when every class of 
material we use, every class of labor we use, has gone up tre- 
mendously in price. In August, 1907, we made a further re- 
duction that brought our rates down to 50 per cent of what they 
were in 1896. Under this new ordinance they would go down 
in 1908 to about 45 per cent of what they were in 1896. In 1909 
they will go down to about 40 per cent. What will happen 
after that, gentlemen, I don't know. Whether after a trial for 
three years of the lowest rates mentioned in the ordinance we 
shall be able to produce energy still cheaper, I do not know. 
That is a matter for the future. 

INFLUENCE OF MAXIMUM LOAD ON RATES 

This chart (Fig. 2) represents the total output of our com- 
pany. The lower irregular line is the load of an average day 
in the middle of the summer and the upper irregular line is 
the winter load. In summer the average load bears the rela- 
tion of, say, 35,000 to the maximum of 48,000. In winter the 
average bears the relation of 48,000 to 95,000. Now this high- 
est peak is the governing point of our interest account. It is 
the governing point of all charges that are not absolutely de- 
pendent upon the amount of our load. For instance, probably 



58 ADDRESSES OF SAMUEL INSULL 

two-thirds of the amount of coal is dependent upon exactly 
how much load we have on as a maximum. The other third 
we figure in with what we might call a fixed expense, or part 
of our fixed charges, just like interest. 

This rise and fall determines whether we make money or 
whether we lose money. So close are our finances connected 
with our maximum load that it would be quite a possibility for 
us to take, for the same dollars and cents we are receiving now, 
business of such a character that instead of paying our stock- 
holders a return for their money, we would absolutely lose 
money for them. That is the main cause, that question of the 
maximum load, of all the trouble in fixing electric-lighting rates. 
The gas company would be subject to precisely the same con- 
dition if it were not for the cheapness of storage. Storage with 
us is practically an impossibility. The Commonwealth Edison 
Company has about $1,500,000 invested in storage batteries 
in this downtown district. We do not carry that investment to 
help us out at a period of maximum load, but solely to insure us 
continuity of service. 

COST OF SUPPLYING VARIOUS CLASSES OF CUSTOMERS 

This chart (Fig. 3) gives five different classes of consumers. 
The first is the small office building, where the relation of the 
maximum to the average load is only 10 per cent, or where our 
service would be equal to, say, two and a half hours out of the 
twenty-four. In order to break even we would have to get 
about 21.5 cents, or 20 cents, and then 22. With the small 
flat, which comes next, we come out a little better, though the 
consumption is still very small. We would not come out quite 
as well under the new rate as under the rate now in existence. 
Our maximum should be about 15 cents. We are getting now 
about 14 cents. It is proposed under the new ordinance to 
make 12 cents the maximum next fall, so you see we don't 
make much money out of small offices and small flats. With the 
larger flat, we can almost get out at cost on the new rates. 
You can take it as a certainty, gentlemen, that all that business 



RATE-MAKING EXPLAINED 



59 



is a loss, figuring 6.5 per cent on money, 6 per cent deprecia- 
tion, 1 per cent for taxes and 0.5 per cent for insurance. 

We come next to the average store. The merchant uses 
light about 20 per cent of the time, or nearly five hours a day, 
and we begin to get a little profit out of him. As a matter of 




Fig. 3. Relative Cost of Electric-Lighting Supply 

fact, our money is really made out of our long-hour users, people 
who use it 40 per cent of the time, nine and a half hours a day, 
and do a wholesale business. 

Let me tell you, gentlemen, that the avowed policy of the 
company is to do its small business at a loss and make its 



60 ADDRESSES OF SAMUEL INSULL 

profits out of its big customers. An investigation of our rates, 
let it be ever so extensive, can only give you that information 
finally. It will show you that we are discriminating against 
the large concerns on State Street in favor of the small flats and 
small people in the outlying territory. I don't know that we 
have a right to do that, but that is the avowed policy of our 
company, and if it does not suit the community, all they have 
to do is to put up our maximum rate to about 20 cents. The 
big man would be protected and the small man would be com- 
pelled to pay more for his light. The same operation would give 
the big man a big discount. Mr. McCormick 1 says he has 
heard that our rates for railway power are $15 per kilowatt 
per year, and half a cent a kilowatt-hour. That is so, with a 
certain guaranty as to consumption. This is the first time it 
has ever been made public, but I have never objected to its 
being made public. It is far better for us, and far more satis- 
factory, than supplying private houses, because it can be done 
without coming in contact with any branch of the city govern- 
ment, and, as I have said before, any man who has had to deal 
with public affairs, I don't care whether it is the Mayor or the 
Council or the officials of the city hall, or the public-service 
corporation man, will tell you that the one absolutely desirable 
thing to do is to be able to conduct your affairs without coming 
hi contact with the government. 

A PLEA FOR REGULATED MONOPOLY 

I want you to understand that I am very much in accord 
with the regulation by the proper authorities of such utilities 
as the one I operate. I think I am one of the first men in this 
community to advocate their proper regulation, but there is 
one great mistake that is being made at the present time. You 
are trying to preserve competition, and at the same time you 
are trying to regulate on a monopoly basis. Now, in the 

1. Mr. Robert R. McCormick, then president of the Board of Trustees 
of the Sanitary District of Chicago. Mr. McCormick had preceded Mr. Insull 
in the discussion and urged further study of the subject. Except in one or 
two minor details, Mr. Insull indorsed what Mr. McCormick had to say. 



RATE-MAKING EXPLAINED 61 

business I manage there is no justification for competition. 
The building up of a separate distribution system, for instance, 
by the Sanitary District, is a financial absurdity. Either 
they ought to own us or we ought to buy their power. It is 
the same way with the street-railway systems. It is the only 
economical way to do the thing, and it has got to come 
finally. It has either got to come by private ownership, a 
monopoly thoroughly protected, with regulation of the most 
minute character and publication of all the figures of the op- 
erating property, or else it has got to come by municipal owner- 
ship. The latter, I think, would be a calamity, but it has got 
to come one way or the other. As believers in proper regula- 
tion, we have done all we could to enable the authorities to 
look into our affairs and to study them thoroughly and to come 
to a wise conclusion. The only error, I think, that has been 
made in the matter has been that the maximum rate is pretty 
low, so that we must do quite a large and growing amount of 
our business at a loss. 

DISCUSSION (IN ABSTRACT) 

MR. ROSENTHAL i I would like to ask Mr. Insull what would 
be necessary in order to put his business on a monopoly basis, 
assuming that we ought to do so. 

MR. INSULL: I think it would be necessary to get some 
legislation before that could be done, and then probably work 
out some scheme not unlike the present street-railway scheme, 
but I think legislation would be necessary. 

MR. WALTER L. FISHER: I am delighted to have Mr. 
Insull add his voice publicly to the doctrine which some of us 
have been preaching for a long time, that these public utilities 
should be natural monopolies under the protection of the law; 
that they should stand for the utmost publicity in all the 
details of their affairs, and that they should be effectively regu- 
lated. I think his statement, that it must be one thing or the 
other, is a complete exhaustion of the subject. At the same 
time I am hardly able to agree that it would require legislation. 
I think the only legislation that would be necessary to give all 



62 ADDRESSES OF SAMUEL INSULL 

the monopoly that we could give, would be legislation by the 
City Council, and not by the General Assembly. I know of no 
reason, in other words, why the Sanitary District could not sell 
to the Commonwealth Edison its power at a lump price, pro- 
vided that power was again to be sold to the citizens at simply 
a fair return on the business of the company. 

Of course, if it is true that the small flat and the still smaller 
household consumer in the chart which Mr. Insull has shown 
here is getting his electricity at less than cost, that raises a 
very interesting question as to how far it is public policy to 
permit that to be done. Personally it seems to me that if they 
fix a maximum rate, say of 15 or 20 cents for a single lamp for 
an hour, or whatever the unit of measurement is on this large 
class of consumers who only use that large rate and never would 
be using the secondary rate, then they should, in fixing the 
secondary rate, take into consideration that particular class of 
customers. It seems to me that this question is entitled to 
greater consideration, because I would assume that they repre- 
sent, perhaps, the great mass of the people of this city, in num- 
bers, at least, who are consumers of electric light. I may be 
wrong in my deduction from the facts, but that is what im- 
presses itself upon my mind. Now, the question as to whether 
we should compel the electric-lighting company to furnish at 
cost, or below cost, to the small consumers as a matter of public 
policy is one that deserves consideration. Perhaps it is like 
the method which has been adopted in the use of water in this 
city. In most discussions of water rates it is conceded that 
public policy requires the furnishing of water to the small con- 
sumer even at a loss, that it is public policy to have water used 
by the small consumer and to make his rates low, even unduly 
low. I suppose that the widespread distribution and use of 
electric light throughout the city is a public consideration that 
perhaps this matter has some bearing upon. That, at any rate, 
seems to me to be the main question. 

MR. INSULL: There are just two points I wish to speak on, 
and then I am through. One is our interest in having this 
ordinance cleaned up and out of the way. Now, we have to 



RATE-MAKING EXPLAINED 63 

raise very large sums of money. I have before me here a state- 
ment of the amount of money that we have put in year by year 
for the last fifteen years. I won't burden you with it, but even 
in this year, which is not a year when public-service corporations 
are trying to extend their business but are trying rather to 
curtail our expenditures this year will be somewhere between 
two and three million dollars for extensions. Last year they 
were between three and four millions of dollars. The year 
before they were between four and five millions of dollars, and 
for the year before that between three and four millions of dol- 
lars. Now, gentlemen, the agitation of this subject its 
being left in the air for so long has cost us, in my opinion, 
about one per cent additional for money we have had to raise 
in the last two years. There is no question about it. Now, 
we don't have to pay it. I am talking with entire candor. It 
comes out of the consumer finally. All we can ever expect 
is a fair return on money invested. My own judgment is that 
no public-service corporation wisely administered in the fu- 
ture will get much more than six per cent on its investment. 1 If 
the money we borrow costs us an excessive amount it is a big 
part of the cost of our operation, and the longer this matter is 
left open the more trouble we will have in raising funds. You 
have had a great example of that in this community. You 
have had here the Chicago City Railway Company and the 
Chicago Union Traction Company. Owing to troubles, rightly 
or wrongly, over the question of their life and ordinances, the 
properties went down from month to month and from week 
to week. Now, if we are put in a position where we cannot 
raise the necessary money on favorable terms this business 
will require an average of about four million dollars of new 
money a year for the next twenty years to come why, we 
simply cannot expect to give the service or the low prices. 

1. It is probable that Mr. Insull referred here to the total cash investment. 
It might be added also as a fair deduction that if a company is able to borrow 
money at a low rate on bonds it should not be precluded from paying dividends 
on stock at a higher rate. Further, it may be borne in mind that the ruling rates 
for money at the time this statement was made in an offhand discussion were 
entirely different from those prevailing at the present day, seven years later. 



64 ADDRESSES OF SAMUEL INSULL 

There was one thing, I think, which Mr. Fisher said which 
might give an erroneous impression. He said it might be a 
question of public policy, selling energy for a loss to the small 
consumer. We started that as an experiment before there was 
any question of regulation. We are hoping to stimulate the use 
of electricity outside the center of the town, so that eventually 
our fixed charges might possibly be reduced, and then our cost 
would consequently go down. I think it would be a great 
mistake to change that situation at the present time. On the 
other hand, if you attempt to classify our rates by ordinance, 
you will inevitably put up the cost to the small consumer, stifle 
the use by the small consumer, and put down the cost to the 
people who can best afford to pay for it. A large consumer is 
well able to regulate his own price because the price has to 
come to a point where it will compete with his own plant. 

MR. GEORGE E. HOOKER: These charts, presented to us 
by Mr. Insull, are the charts of the Commonwealth Edison 
Company. They are not the charts of a disinterested party. 
The charts of a disinterested party, the material, the opinion, 
the conclusions and recommendations of a disinterested party, 
are what must count; and these we lack. 

MR. INSULL: If Mr. Hooker is willing, I will undertake 
to put at his disposal here evidence between now and the public 
hearing to enable him to prove the correctness or incorrectness 
of those charts. I do not present those charts as the president 
of the Commonwealth Edison Company. I present those 
charts as an expert in this line of business, the oldest expert 
in the business, and I stake my reputation on those things. 
They are simply absolutely true. It is not a question whether 
they are the charts of the Commonwealth Edison Company or 
the Sanitary District, or Tom, Dick or Harry. They are 
absolutely susceptible of proof. 



CITY CLUB DISCUSSION OF THE 21,000- 

KILOWATT CONTRACT WITH THE 

CHICAGO CITY RAILWAY 

COMPANY 1 

MR. WALTER L. FISHER: In January, 1907, about a 
month before the [traction settlement] ordinances 
were passed by the City Council they were passed 
on February 11, 1907 the Chicago City Railway Company 
made a contract with the Chicago Edison Company, or the 
Commonwealth Edison Company, for practically all of its 
electrical current. I believe the amount specified in the con- 
tract was 21,000 kilowatts. * * * The Commonwealth 
Edison Company undertakes, for a period of ten years and 
thereafter, so long as the City Railway Company desires to 
continue, to furnish it the necessary electric power for its entire 

1. One of Mr. Insull's important achievements, in carrying out in practice 
his theories of regulated monopoly in electricity supply, making economic 
use of the community's diversity factor, was the making of contracts with the 
electrically operated elevated and surface railways of Chicago. Almost uni- 
versally the large electric-railway companies had manufactured their own 
electrical energy as a matter of course, and it required boldness and confidence 
as well as sound reasoning to convince these shrewd public-utility operators 
that it was to their advantage to discontinue the generation of electricity. 
The situation in Chicago, where a Board of Supervising Engineers was placed 
in charge of traction affairs in 1907, made it necessary for that body to approve 
a contract by which the Chicago City Railway Company agreed to purchase 
all its electrical energy from the Commonwealth Edison Company. On October 
19, 1908, while this contract was pending, the subject was discussed at a lunch- 
eon of the City Club of Chicago. Portions of a report of that discussion are 
here reprinted from The City Club Bulletin. Dr. Charles E. Merriam, who 
presided at the meeting, is now (March, 1915) professor of political science 
in the University of Chicago and alderman from the Seventh Ward of Chicago. 
Mr. Walter L. Fisher, special traction counsel for the city, was afterward Sec- 
retary of the Interior in President Taft's cabinet. Mr. Bion J. Arnold, chair- 
man of the Board of Supervising Engineers, is a past-president of the American 
Institute of Electrical Engineers. Mr. George E. Hooker is civic secretary 
of the City Club. 

65 



66 ADDRESSES OF SAMUEL INSULL 

and complete operation. The contract is for a ten-year period, 
but contains a provision that whenever the City Railway Com- 
pany demands additions to the service the contract is arbitrarily 
extended three years from the date of any such requirement. 
The City Railway Company must take all of its power from 
the Commonwealth Edison Company for seven years. From 
that time on the City Railway Company may manufacture its 
own electric power for any excess that arises after the seven 
years, the body of the contract running to the end of the ten- 
year period, but the excess being supplied by the company 
itself. 



WHY ELECTRICAL ENERGY is CHEAP IN CHICAGO 

MR. BION J. ARNOLD (after reciting different methods by 
which the Chicago City Railway Company could have pur- 
chased or manufactured electricity): None was satisfactory. 
We couldn't afford any, though we decided it would be cheaper 
to build our own plant than to pay the Commonwealth Edison 
Company the price that that company at that time asked, 
which was $15 per kilowatt, primary charge, per year, and 0.5 
of a cent per kilowatt-hour for the energy consumed. But 
the contract, as it stands today, allows the railway company 
to purchase its power at $15 per year per kilowatt, primary 
charge, and 0.4 of a cent per kilowatt-hour consumed, the 
difference between the 0.4 and the 0.5 throwing the decision in 
favor of the Commonwealth Edison Company. And I want 
to tell you, gentlemen, it was no easy task to convince Mr. 
Insull that he ought to accept that figure, but the company suc- 
ceeded in doing it, backed by the engineers, who said they could 
not afford to pay more than that and would not. Mr. Insull 
finally reluctantly came to that figure, and we have the con- 
tract prepared. I believe it to be a sound and safe and ad- 
visable contract to enter into. 

One thing more may be said namely, a word or two about 
the facilities of the Commonwealth Edison Company to furnish 
this power. It is not, perhaps, generally known among non- 



STREET-RAILWAY CONTRACT 67 

technical men, and it is only due Mr. Insull and his technical 
staff and business organization to say, that Chicago possesses 
the most up-to-date power plant in the world, the greatest 
power plant by far in capacity that has ever been built, and 
that power is being produced in Mr. Insull's plant for less money 
per kilowatt-hour than in any other place on earth. And 
Chicago has developed that system. That is one reason why 
we can afford to buy that power now, and buy it at a cost that 
is the same as we can produce it for ourselves, or probably a 
little less. It is a great thing for this country, for the technical 
men especially. So much so that when Europeans come over 
here the first place they head for is Chicago and the Common- 
wealth Edison plant. I mean men interested in that particular 
line of work. 

ECONOMIC SIGNIFICANCE OF THE CONTRACT 

MR. SAMUEL INSULL: When this contract was originally 
drawn, our proposition was based upon a ten-year period. It 
is not a good financial proposition for a less period. The City 
Railway consumption will run up to not less than 40,000 kilo- 
watts, calling for an investment, in my judgment, of around 
$7,000,000. The total possible income from this business, over 
a period of ten years, if we get all the business, is $14,000,000. 
Anyone in this room can figure how much of that $14,000,000 
has got to be spent in interest and depreciation, and how little 
is left for operating expenses, taxes, insurance and profits. It 
was only after much discussion that we made the concession 
relative to the last three years' increase. It is a distinct ele- 
ment of this contract that we shall have the exclusive right of 
supplying the City Railway with energy. Our price is based 
upon that exclusive right. 

I myself and those who work with me have a decided opinion 
as to how the electrical energy used in a community like this 
should be produced. We believe that it should be produced as 
a monopoly, and this contract is in that direction. It means 
cheaper electricity for the City Railway Company; it means 



68 ADDRESSES OF SAMUEL INSULL 

cheaper electricity for the smallest user of power or light in this 
community, and in that respect I think we are making a record 
here in Chicago far in advance of what is being done in any city 
on either side of the Atlantic. If I were considering this con- 
tract by itself, I would not recommend to any body of financiers 
the providing of $7,000,000 to fulfill the conditions of this 
contract. I could not show them any profit in the operation by 
itself. It has to be taken in connection with the whole of our 
business, with practically a monopoly of the production of 
electrical energy in this community. 

I was very loth to make the concession as to the last three 
years, and did it after Mr. Arnold and his associates had pointed 
out that it was an unreasonable position to put the City Railway 
in namely, that they would have to build a plant to take care 
of their entire business on a given day; and it was on that basis 
that we conceded the three years' increase. We certainly 
would not have consented to their going out and purchasing the 
energy, because it would have been at absolute variance with 
the basis on which we were negotiating. We were negotiating 
to prevent a duplication of investment, and that we have 
accomplished in this contract. 

Suppose that we are all wrong in our figures. Suppose Mr. 
Arnold and his office, and the Board of Supervising Engineers, 
and the City Railway Company are all wrong, and that this 
should be so advantageous a contract, netting us so much 
money out of it as to make it a hardship on the city, the effect, 
nevertheless, of this contract would be to help lower the cost of 
production of the energy that we sell to the smallest users. 
Every five years the city of Chicago has the right to regulate 
our rates, based on our cost, to our regular retail customers ; so 
the thing would practically adjust itself so far as the community 
is concerned. 

Mr. Fisher referred to a board of arbitration. The Com- 
monwealth Edison Company, in making this contract, has 
placed itself in a position practically where it nominates one 
member of a board of three arbitrators, and the other party to 
the contract (because, after all, the interests of the city and the 



STREET-RAILWAY CONTRACT 69 

interests of the City Railway Company are identical) has the 
right to appoint the other two members of the arbitration board. 



WHY THE EDISON COMPANY CAN AFFORD TO SELL so CHEAPLY 

MR. ARNOLD: There is one point which I did not make 
clear, as to how the Commonwealth Edison Company can 
afford to produce this power at the cost the railway can make 
it for, and at the same time make a profit. The first element 
in it is that the Edison company is in business on a large scale, 
manufacturing power and selling it throughout the city. Of 
course, it can manufacture at a very low cost, as I previously 
pointed out. 

The other point is that the Chicago City Railway Company 
would have to produce its power in units of about 5,000 kilo- 
watts capacity each, in order to have units that would divide 
up during the 24-hour load period, shutting one down and 
starting others up, so as to make them work economically during 
that period. The load, you understand, on the railroad is very 
high in the morning, down through the day and high again in 
the evening, and down again in the night. To handle that kind 
of a load would require electrical units of about 5,000 kilowatts 
capacity. The Commonwealth Edison Company, however, is 
now installing electrical units of 14,000 kilowatts capacity, 1 
nearly three times as much, you see. The cost of the kilowatt 
capacity of an electrical plant varies with the size of the unit. 
The smaller the unit the higher the cost per kilowatt, conse- 
quently the larger the unit the lower the cost; and, therefore, the 
investment Mr. Insull has to make in this plant is less per 
kilowatt than the Chicago City Railway Company would have 
to make. 

The difference in the fixed charges on that investment, and 
the difference in the cost of operating large units, which take 
fewer men per kilowatt-hour output, makes just the difference 
between what it would cost the Chicago City Railway Company 

1. Seven years later this figure of 14,000 kilowatts rating in generator units 
could be changed to 30,000 kilowatts. 



70 ADDRESSES OF SAMUEL INSULL 

to make this electricity and what it would cost Mr. Insull to 
make it; and that difference is Mr. InsulPs profit. 



EFFECT OF PERIODICITY EXPLAINED 

MR. GEORGE E. HOOKER: I would like to ask Mr. Arnold 
if the different form of electricity produced by the Sanitary 
District would stand in the way of its being utilized on the 
West Side? (Referring to Chicago Railways Company.) 

MR. ARNOLD: Yes, sir. 

MR. HOOKER: So it is not any more likely to be used there 
than anywhere else? 

MR. FISHER: I don't know whether Mr. Ellicott 1 is in the 
room, but the estimate given to me was that reduction would 
add about 13 per cent to the cost. 

MR. HOOKER: Then I would like to ask Mr. Arnold, if it is a 
proper question to ask here, why it is that those methods are 
different? 

MR. FISHER: Why is one 60-cycle and the other 25? 

MR. ARNOLD : The reason is this : This question of frequency 
has been a subject of debate among engineers ever since we 
started in on electrical work. We started in with 120 cycles, 
the idea being that the higher the frequency the better the en- 
ergy is for electric lighting. We started in with electric light- 
ing, you understand. As the frequency comes down, the poorer 
it is for lighting. When it gets down to 25 cycles you can see 
the fluctuation in an incandescent lamp. You can run lamps 
on 25 cycles, but they are not satisfactory; consequently, plants 
that are installed for lighting purposes only are usually installed 
with a moderately high frequency. To get at something that 
could be used for power in small quantities, and for lighting 
also, the standard has become 60 cycles for lighting. You 
can run 60-cycle motors. Sixty-cycle motor-generators or 
rotary converters are being used for railroad purposes, but none 
of them has been constructed yet above 500 kilowatts. Very 

1. Electrical engineer of the Sanitary District of Chicago. 



STREET-RAILWAY CONTRACT 71 

few have as much as that. Most of them are about 250 kilo- 
watts, and are not giving entirely satisfactory service. 

With the state of the art such that we cannot buy those 
rotary converters above 500 kilowatts the size the Chicago 
City Railway Company is using now being 2,000 kilowatts 
you see it is impracticable for us to consider 60 cycles in the 
railroad business. The 25-cycle frequency is better for power 
purposes. The lower the frequency, the better for power pur- 
poses. Consequently, we have two antagonistic elements 
working there, the higher frequency the better for lighting, the 
low frequency the better for power. 

So we tried to harmonize them to 60-cycle frequency for 
lighting and small power. Railway work we have cut down to 
25 cycles. All of the machinery installed for the Chicago City 
Railway Company and for the Chicago Railways Company is 
at 25 cycles; consequently if we buy power from any other 
source that produces it at any different frequency, we have got 
to put in a motor-generator or rotary converter. The cost of 
that machine, with interest, depreciation and operating charge, 
makes this difference in price. 

How THE EDISON COMPANY MET THE QUESTION OF 
FREQUENCY 

CHAIRMAN MERRIAM: I would like to ask Mr. Insull how 
the Commonwealth Edison Company combines those two things, 
the lighting and the power? 

MR. INSULL: Part of the answer I would prefer not to give, 
because I do not care to get launched on the subject of criticism 
of competitors. 

When the Commonwealth Edison Company, or, rather, its 
predecessor, came to the conclusion that what it wanted to do 
was to monopolize the production of power in this community, 
it also came to the conclusion that the easiest way to do that 
would be to give the very large users of power their energy with 
the least possible conversion; and, where conversion is necessary, 
to confine it, as far as it possibly could, to its own business. 



72 ADDRESSES OF SAMUEL INSULL 

In any event, in order to deal with the business in the down- 
town district, our company would have to convert, whether we 
produced 60 cycles or 25 cycles, as we convert from alternating 
current to direct current. The problem before us was how to 
deal with the territory outside the center of town, where you 
distribute over a much wider area and supply in much smaller 
quantities, except for such large consumers as the street and 
elevated railways, and certain very large manufacturers. 
We decided it was better to confine the conversion to our own 
stations; and for lighting purposes we converted outside of 
the center of town from 25 cycles to 60 cycles. 

MR. ARNOLD: You generated at 25 and converted it? 

MR. INSULL: We generate at 25. The wisdom of that 
decision is best shown by my stating that more than 70 per 
cent of our production is used as 25-cycle energy by our cus- 
tomers. 



THE LARGER ASPECTS OF MAKING AND 
SELLING ELECTRICAL ENERGY 1 

MY THEME for this evening relates to no new subject. 
It is one we have been discussing for many years 
the question of rates, the question of how to sell our 
manufactured product. There are a number of essentials 
which we must know before we can decide upon the selling 
price. We must know, first of all, the cost of manufacture. 
We must know the elements that go to make up that cost and 
whether we have the most economical possible plant with which 
to produce our goods. Let me say, in passing, that the very 
best monument that any of you can erect, indicating the suc- 
cessful operation of your business, is a first-class junk pile. I 
do not think there is any country where manufacturing is 
carried to a higher economical point than in the United States; 
but I am sorry to say that I think that there are but few manu- 
facturing businesses in the United States where the tendency 
of the proprietor is to hold on to his uneconomical machinery 
to the extent that a number of our friends in the electric-light- 
ing business hold on to their uneconomical manufacturing 
plants. 

1. An address delivered before the Association of Edison Illuminating 
Companies at Briarcliff, N. Y., on September 1, 1909. This important utter- 
ance indicates the breadth of vision which Mr. Insull had now attained in 
relation to the economics of electric service. On this occasion the author, 
for perhaps the first time in addressing an audience, spoke in positive terms on 
the larger aspects of the electricity-supply business. He expounded the funda- 
mental laws of the central-station industry before the leading men engaged in 
that industry, and it took some courage to advocate conceptions and methods 
that were almost revolutionary. The philosophy of the unified or syndicate 
operation of electric central-station properties is set forth here with ability 
and candor. The importance of diversity factor is emphasized in this and 
succeeding papers. The speaker was not without the courage of his convic- 
tions, for within two or three years he had engaged in the unification of elec- 
tric-service properties on a much more extensive scale than ever before. 

73 



74 ADDRESSES OF SAMUEL INSULL 

We assume that we are in the business of controlling the 
generation of energy in the communities in which we live. 
My figures are necessarily taken from my experience in Chicago; 
but let me tell those of you who run small plants that my 
experience in operating small plants leads me to the conclu- 
sion that the same principles that govern the business in its 
operation in a city of over two millions of people also applies 
to cities from 25,000 up to, say, 200,000 people. The situation 
in Chicago is this: Our output for the year ended June 30, 
1909, amounted to 414,000,000 kilowatt-hours. 1 We did a fair 
proportion of street-railway business. Our light-and-power 
business (that is, the ordinary business run by electric-light- 
ing companies throughout the country) amounted to 184,000,- 
000 kilowatt-hours, while our street-railway business amounted 
to 230,000,000 kilowatt-hours, so that of the 414,000,000 kilo- 
watt-hours generated, more than half went to street railways. 
In addition to the amount bought from us, the street-railway 
companies probably produced themselves 230,000,000 kilowatt- 
hours, so that if we had had their entire business, and added 
it on to what we produced, our output would have reached the 
imposing figure of 644,000,000 kilowatt-hours. 

Stop for a moment and consider what a small proportion 
of the production of energy goes to the ordinary electric-light- 

1. For comparison, it may be stated that the Commonwealth Edison 
Company generated the great total of 1,114,000,000 kilowatt-hours of electrical 
energy in the calendar and fiscal year ended December 31, 1914. This is 
probably the largest output of any individual electricity-supply system in any 
city in the world. Of the amount mentioned 642,000,000 kilowatt-hours 
was for railway customers and the remaining 472,000,000 kilowatt-hours was 
for light-and-power customers. Comparing the reports of June 30, 1909, and 
December 31, 1914, it will be seen that in the period of five and one-half years 
the total output increased 169 per cent, the railway output increased 179 per 
cent, and the output for light-and-power customers increased 157 per cent. 
Practically all of the electrical energy required by the surface street railways 
and elevated railways of Chicago is now (1915) supplied by the Commonwealth 
Edison Company. At the same time industrial users and small consumers 
have been assiduously cultivated, for the total number of customers on the com- 
pany's books on February 1, 1915, was about 254,000. The rates for the small- 
est residence customers are ten, five and three cents a kilowatt-hour, depending 
on the number of hours' use of the maximum demand. Thus the electrical 
situation in Chicago would seem to confirm the essential soundness of Mr. 
Insull's doctrines in relation to electric service. 



LARGER ASPECTS 75 

and-power customer. We in Chicago have the credit, rightly 
or wrongly, for pushing our business with reasonable vigor, 
but the above figures show that if we had all the street-railway 
business, our ordinary light-and-power business would amount 
to less than one-third of the whole. And that is not the whole 
story of the amount of energy produced. Our estimate is 
that isolated plants, manufacturing plants, industrial plants 
and other consumers offer the possibility of 405,000,000 kilo- 
watt-hours yet to be obtained. This does not take into con- 
sideration the growth of the city at all; the consumption of 
electricity mentioned is right at our door. If we can produce 
it economically enough, and if we discover the right way to 
sell it, there is a block of 400,000,000 kilowatt-hours that we 
should secure. 

SUPPLYING ALL THE DEMANDS OF THE COMMUNITY, INCLUDING 

RAILWAYS 

Take another phase of the question the electrification of 
the terminals of the steam railroads. All we can do in this 
case is to estimate, and our estimate is that it would take about 
205,000,000 kilowatt-hours to take care of the steam-railroad 
terminals centering in Chicago. All that energy should be 
produced by one concern, and such will be the case eventually. 
There is no more reason for the existence of a series of different 
generating stations in a city than there is for the existence of 
a great many isolated gas plants in a community. If all that 
energy were produced by one organization (I care not whether 
it is the local electric-lighting company, or whether that com- 
pany buys power from a power company), we could get down 
to rock-bottom in cost of production and consequently rock- 
bottom in our rates of selling. The trend of the times is to- 
ward concentration of production; it is inevitable that it must 
come. Ours is a business which is a natural monopoly. It 
matters not what the legislation of the moment may be, what 
the opinions of the politicians may be, what our own opinions 
may be, eventually, all the electrical energy for a given area 
must be produced by one concern. 



76 ADDRESSES OF SAMUEL INSULL 

The total demands under consideration would amount to 
1,254,000,000 kilowatt-hours in Chicago. Take that on a 
percentage basis. The total light-and-power business of a 
company as large as the Commonwealth Edison Company, 
having invested in its business somewhere between $55,000,000 
and $60,000,000 in cash, amounts to 14.7 per cent of the whole. 
The street-railway business amounts to 36.6 per cent of the 
whole. The isolated plants and the industrial-power business 
that we have not yet got call for 32 per cent (more than double 
our existing business), and the steam-railroad consumption 
would amount to 16 per cent. You will notice that the steam- 
railroad consumption is the smallest with the exception of the 
present electric-light-and-power business. 

I was discussing this subject with one of my friends this 
evening, rehearsing on him a little, and he said: "You cannot 
get all that. Conditions are such that you have been able to 
get part of it in Chicago." The fact is that in the course of 
some three years we have been able to sell a great amount of 
energy I am talking kilowatt-hours, not dollars and cents 
to the street railways and the elevated railways, notwithstand- 
ing the fact that the franchise-ordinance condition of the 
surface street railways of the city of Chicago are such that 
they are able to raise their money on a better basis than any 
public-service corporation in this country, with probably the 
exception of three. It was no case of their needing our assist- 
ance to finance them; they have practically the credit of the 
City of Chicago, whose credit must necessarily be high, be- 
cause the debt of the municipality is lower, probably, than that 
of any city of its size in the world, in proportion to population. 
The street-railway companies have practically the credit of 
the city pledged behind them; their financial arrangements 
are made with the leading bankers of the country; and it is 
much easier for them to raise money in amounts of $10,000,000 
and $20,000,000 than it is for any of us in this room to raise 
it in single millions. It was no case of necessity. It was a 
case of demonstrating that it was the best thing for the railway 
companies to do; that it was the best thing for us to do, and, 



LARGER ASPECTS 



77 



perhaps, of taking some chances as to what the outcome would 
be. We naturally had to theorize on it at the start. We 
knew little or nothing of what the results would be; it was purely 
an experiment on our part. The impression has gone out 
among some of our friends that we were able to take advantage 
of a peculiar situation, so far as finances were concerned; but that 
impression is entirely an erroneous one; and I want to get that 
out of your minds before going ahead with any further ex- 
planation. 

ANALYZING THE COST OF PRODUCTION 

Let us consider the cost of production. Fig. 1 represents 
the cost of supply, divided, as you see, into three parts oper- 
ating charges, fixed charges and the total of the two. You 
will note also that different symbols are used in the diagram 
to indicate the cost of supplying the street railways, the average 
residence using carbon lamps and the average residence using 
tungsten lamps. Energy sold to street railways is delivered 
at the substation. We have practically a single cable, or in 
some cases two cables, to each substation. The metering is 



DPERATINQ CHARGES - 




FIXED CHARGES 

J8TREET RAILWAYS 

VERAGE RESIDENCE 

NG CARBON LAMPS 
AVERAGE RESIDENCE ' 
USING TUNGSTEN LAMPS 





Fig. 1. Analysis of the Cost of Producing Electric Service 



78 ADDRESSES OF SAMUEL INSULL 

done at our switchboard. The amount of electricity we sell 
to street railways, 230,000,000 kilowatt-hours, is divided, I 
think, among six or eight customers. Necessarily, the cost of 
production runs up pretty high. Column 1 of Fig. 1 represents 
the energy supplied to the street railways. Column 2 represents 
the production cost of the average residence lighting using car- 
bon lamps and column 3 represents the average residence light- 
ing using tungsten lamps. The difference in cost of production 
is not great. I mean now the difference in the cost of the en- 
ergy generated at the station, based on metering at the switch- 
board; but when you come to the distribution expenses, you 
will notice that column 4 is so small that it can hardly be seen. 
Column 4 represents the distribution cost of the street-railway 
business. So columns 5 and 6 represent, respectively, the 
distribution cost of the average residence using carbon lamps 
and the average residence using the tungsten lamp. The same 
remarks, you will note, apply to management and supervision, 
(columns 7, 8 and 9) and the same, necessarily, to municipal 
compensation (columns 10, 11 and 12). 

When we come to metering, the cost of metering the railway 
business (column 13) is but little more than the cost of dis- 
tribution (column 4), whereas, by contrast, the cost of metering 
the ordinary residence runs up as shown by column 14 and the 
cost of metering residences that use the tungsten lamp runs 
still greater, as indicated by column 15. The comparison in 
the loss from "generated" to "sold" is shown by columns 16, 
17 and 18. This loss is practically nothing in the case of the 
street railways, because our energy is sold at our own switch- 
board, and the loss in the other two cases must be precisely 
the same. 

Consider now what is the biggest item, what is usually 
the biggest item, of our expense. You will notice that our 
fixed charges that is, interest, depreciation, insurance and 
taxes are a little less (column 19) than our cost of production 
(column 1), in the case of the street railways, and very consider- 
ably more (columns 20 and 21 compared with columns 2 and 3) 
in the case of residence customers. In distribution, the fixed 



LARGER ASPECTS 79 

charges (columns 23 and 24) are very heavy indeed in the case 
of residence lighting and very low in the case of the street 
railways (column 22). So this goes on all the way through, 
until you put the two together. Column 34 represents the 
total cost, fixed charges and operating charges, for the street- 
railway business. Column 35 represents the total cost of the 
ordinary customer using carbon lamps, with a load factor of 
about 33 per cent, and column 36 represents the total cost of 
the user of tungsten lamps. If you will bear this graphic 
comparison in mind, the enormous difference in cost between 
column 34 and either column 35 or 36, it will be apparent to you 
that our selling price is not really as low as it appears. We 
sell our electricity to railways on a basis of $15 per maximum 
kilowatt per year, figured on an average of morning and eve- 
ning power maxima. In addition, in the case of a company 
where we get, say, from 5,000 to 10,000 kilowatts, we charge 
0.5 of a cent per kilowatt-hour, and in the case of a company 
where we get 30,000 kilowatts or over, we charge 0.4 of a cent. 

LOAD FACTORS OF RAILWAY CUSTOMERS 

The curves of Fig. 2 represent the cost of electricity to a 
railway company under different conditions of load factor. 
We adopted a rule, in selling to the railway companies, that 
we would not take any business unless we got a guarantee of 
35 per cent load factor; that is, that the average use should be 
equal to 35 per cent of the maximum. Our reason for adopting 
that rule was that we came to the conclusion that the average 
load factor of an electric-lighting company was somewhere 
around 30 per cent. Some companies show figures a little 
above that and some of them a little below, partly owing to 
local conditions, but more largely owing to the ability with 
which the product is sold. We made up our minds, in trying 
the experiment, that we did not care to take any business that 
would interfere with our load factor. We wanted it improved 
in any event. We used to talk very glibly at that time about 
the diversity factor, but we, of course, knew absolutely nothing 



80 



ADDRESSES OF SAMUEL INSULL 



about it, as we had no experience in selling large volumes of en- 
ergy to a few customers. 

When we were "up against" the proposition of taking the 
entire business of a railway company, as we have been in the 
case of the Chicago City Railway Company, we came to the 
conclusion in that case we had to take the risk of their business, 
and we had to take whatever load factor the business gave. We 



2.0 




30 40 50 

LOAD FACTORS 



90 100 



Fig. 2 



had some confidence in taking that risk, because we knew if 
we had their entire business, from the experience we had in 
dealing with part of the business, the load factor would be 
better than 35 per cent, and the tendency would be to improve 
the general load factor. 

In actual experience we found that selling the Chicago City 
Railway Company, doing practically all of their business, and 
hi dealing with them for a year and selling them 27,740 kilo- 
watts of maximum demand, the load factor was 48.7, and that 
they paid us a rate of 0.77 cent per kilowatt-hour for the energy 
delivered at our switchboard, we standing the cost of produc- 
tion and the investment in the cable for transmitting the 
energy to their substation. We also found there was far more 



LARGER ASPECTS 81 

profit for us in business at that price than there was in busi- 
ness at a much poorer load factor at 1 cent or 1.25 cents per 
kilowatt-hour. 



APPARENTLY Low RATES MAY MEAN GOOD BUSINESS 

Our experience with the Chicago Railways Company, which 
for the last year has paid 0.5 cent for the secondary charge, in- 
stead of 0.4 cent, was that in selling it 15,820 kilowatts of 
maximum demand we got 42.6 load factor at an average price 
of 0.9 cent per kilowatt-hour. 

Those figures may seem somewhat appalling to some of you 
who are selling your product in small quantities, either as direct 
current or as alternating current. When I speak of small 
quantities, I am speaking relatively; I mean to power customers 
using, say, 100 or 200 kilowatts. But I am sure there are a 
number of gentlemen in this room who would not hesitate to 
take a contract that would yield them $10,000, $15,000, $20,- 
000, or $30,000 a year, dependent on the size of the town 
largely, and whether the system was underground or overhead, 
quoting a price from 2.5 up to 3 cents per kilowatt-hour for 
energy delivered to the customer. If you will take our rates 
and figure on the generation of electricity and the delivery of 
it to the customer's side of the meter, you will find that the 
rate of $15 per kilowatt of maximum demand a year, plus 
0.5 of a cent per kilowatt-hour, without the large amount of 
investment you have to make to take care of your average 
industrial customer you will find that that business, which 
we take at that apparently low rate, is really better business 
than you take when you quote a manufacturer, say, 2.25 or 
2.5 cents per kilowatt-hour. For one thing, our load factor is 
almost twice as good as that of the average manufacturer. He 
will tell you that he is running twelve hours a day and uses 
power all the time; but when you get right down to it you will 
find his load factor somewhere about 20 per cent. I know that 
any of you who have figured on that subject will bear me out 
in what I say. 



82 ADDRESSES OF SAMUEL INSULL 

THE EFFECT OF TAKING STREET-RAILWAY BUSINESS 

I will leave the question of cost and selling price for a few 
minutes, and show you some of the effect that this class of 
business has had upon our load curves. Take, for instance, 
the bearing of the monthly load factor on your cost of station 
production. Fig. 3 gives an example of that. You will see 
the load-factor curve of our light-and-power business, with the 
variation, month by month. The New York Edison curve 




JULY AUG. SEPT. OCT. NOV. DEC. JAN. FEB MAR. APR. MAY JUNE 



Fig. 3 

is shown, also our street-railway curve, and the light-and-power 
and street-railway business of Chicago combined.. You will 
see what an important bearing that must have necessarily on 
our cost month by month, as the combination of our business 
and the street-railway business produces a result in our monthly 
load factor which is very gratifying to us. Take, for instance, 
the low point. Our light-and-power load factor in November 
by itself would be 36, and yet when combined with the street- 
railway business it goes to over 44. The same result is shown 
hi the effect upon our annual load factor. 

I started some six years ago, I think, to take the first busi- 



LARGER ASPECTS 



83 



ness of this character. I think my negotiations started some 
time in 1902 or 1903. In 1899 our load factor, when we did 
nothing except the ordinary line of business, was a little over 
28. Referring now to Fig. 4, you will notice that the annual 
load factor of our light-and-power business stood even for some 
time. Then we began to take advantage of the experience we 
had with starting the railway business; we began to take 
courage, and we started to lower our rate in the industrial- 
power business. Thus our load factor for light and power alone 




1900 1901 



1902 



1903 1904 1905 1906 

YEARS ENDING JUNE 30 



1907 



1909 



Fig. 4 



gradually crept up until it was about 33. What has been the 
effect of our taking the street-railway business? It has been a 
steady climb up to 1908. It went down a little in 1909 owing 
to temporary reasons, but we are still above 40 per cent. The 
comparison there is practically the difference between 30 per 
cent and 40 per cent. Now, what does that mean, gentlemen? 
Suppose you have, as we have, fixed charges on about 
$50,000,000 of investment. Take interest and depreciation, 
10 per cent, that is $5,000,000. Suppose that our business was 
confined entirely to the ordinary lighting-and-power business, 
outside of the railway business. That $5,000,000 in interest 



84 ADDRESSES OF SAMUEL INSULL 

and depreciation would have to be spread over a business where 
the average use of your investment is only 30 per cent of the 
time, practically. What is our present situation? Our in- 
terest and depreciation are spread over 40 per cent, rather than 
30 per cent, a difference of 10 per cent. But, you may say, that 
is only 10 per cent. But what does it really mean? It means 
that the divisor is one-third more and the reduction in fixed 
charges and depreciation in proportion to the dollars invested 
is proportionately less. 

NOT MERELY A QUESTION OF LOCAL, CONDITIONS 

That is a result that you can all obtain. It is not any 
question of local conditions. If it is impossible for you to 
obtain it; if you cannot get the total generation of electricity 
in the community in which you live, or so shape your policy 
that that is eventually where you will come out, the wisest 
thing that you can do, if you have your own money invested 
in the business, is to sell out to the fellow who is the larger 
producer of electricity in your community; just the same as if 
you were a small manufacturer, if you could get a satisfactory 
price, you would be anxious to sell out to the big concern 
which did 90 per cent of the business. It is inevitable, if you 
take the street railways alone in any community, that they will 
be by far the larger producers of electricity, unless you can get 
the job of producing their product, because unless you can get 
that job, it is an impossibility for you so to arrange your cost of 
production on a sufficiently low basis for you to quote a price 
for the industrial-power business in your community that will 
really give you the business. To my mind there is no question 
about that; it is a gospel I have been preaching to my board 
of directors for some ten years past. I have taken the ground 
that we have got to be the main producers of electrical energy 
in our community, or else the other fellow has got to own us. 

I think I can give you an example of that situation which 
occurred in the city of New York a number of years ago. 
What was known as the "Whitney Syndicate" acquired all 



LARGER ASPECTS 85 

the street railways of that city. The old Edison Electric Illum- 
inating Company of New York had been well handled and had a 
fine business, but when the Whitney syndicate acquired the 
street railways the people back of it gave out the information 
that they were going into the electric-lighting business, and 
the best bankers in this country came to terms very quickly 
and sold the Edison Electric Illuminating Company of New 
York. They did not know exactly then that this would be 
done; they were only scared; but the fact was that if the Metro- 
politan Street Railway Company, as then threatened, had 
gone into the electric-light-and-power business, it would have 
been but a few years before it would have been able to sell 
electricity on a much lower basis than the Edison Electric 
Illuminating Company, because it would have had the con- 
ditions, as I will show you a little later, that go to make low 
cost of production, and consequently low selling price. The 
old Edison Electric Illuminating Company of New York had 
not that condition and could not possibly have it. Financial 
conditions have changed the situation somewhat, so that the 
New York Edison Company has no reason to be afraid at the 
moment. 

I want you to understand that to my mind it was a case 
of absolute necessity that we should dominate the energy- 
production situation in Chicago. We have not got there yet, 
but we are getting there gradually. 

THE DIVERSITY FACTOR 

Now, I will turn to another side of the subject. I am not 
an engineer, and I cannot talk technical terms as some of you 
people can, so if I slip up in discussing such a term as " diver- 
sity factor" you will have to excuse me. Fig. 5 shows the 
actual conditions, so far as the light-and-power business and the 
street-railway business we do in Chicago is concerned. We 
have estimated the steam-railroad consumption, partly on 
experience that we have been able to obtain from the New York 
Central Railroad and other railroads, and partly by taking the 



86 



ADDRESSES OF SAMUEL INSULL 




LARGER ASPECTS 



87 



Interstate Commerce Commission's statistics of income and 
working out the probable consumption of electrical energy from 
the income basis. Of course, all we have to do, so far as pro- 
viding the investment is concerned and as you noted in Fig. 1 
the largest items we have are investment expenses is to 
provide the necessary plant to take care of the maximum load 
that we may have at any one time during the year. Fig. 5 
represents, among other things, our load at the time of our 
total-output maximum for the year. The column on the right 
represents the coincident maxima of different systems. The 
column on the left represents the non-coincident maxima of the 
different systems. What we have to provide money for, and 
therefore the item that, when you get down to it, comes into 
the question when we are figuring our cost, is the situation 
shown by the column in the center. You will notice there we 
have a load factor of 43 per cent. The non-coincident maxima 
of the people that we serve, assuming that we are serving steam 
railroads, show a total maximum of 25.8 per cent greater than 
the maximum we would have at the period of our maximum 
load. 1 

Conditions under which we actually sold energy to railways 
are shown in Fig. 6. We have no steam-railroad customers, 
and Fig. 5 gives an assumption based on our expectation of 
getting some in future. Fig. 6 shows conditions under which we 
actually supply. The highest coincident maxima of the street 
railways occurred on the 15th of February. Taking the 
highest maxima for each of the separate companies, they came 

1. In the original chart the following information was given in tabular 
form: 



Non-coincident Maximum Kilowatts . 

Kilowatts at Time of Total-Output 

Maximum 

Difference 

Percentage of Difference 

Coincident Maximum Kilowatts 

Kilowatts of Time of Total-Output 
Maximum 

Difference 

Percentage of Difference 



Steam 
Railways 


Street 
Railways 


Light 
and Power 


Total 


69,300 


68,650 


68,310 


206,260 


53,900 


53,300 


56,800 


164,000 


15,400 
28.6 


15,350 
28.8 


11,510 
20.3 


42,260 
25.8 


63,000 


60,010 


64,950 


187,960 


53,900 


53,300 


56,800 


164,000 


9,100 
16.9 


6,710 
12.6 


8,150 
14.3 


23,960 
14.6 



88 



ADDRESSES OF SAMUEL INSULL 



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LARGER ASPECTS 



this way: On February 13 we had the maximum of the North 
Shore Electric Company, that is a lighting or electric-service 
company. The maximum of the Oak Park "L" Company 
came on February 1; that of Metropolitan "L" on February 6, 
the Northwestern "L" on February 16, the Chicago Railways 
Company on February 15, and the Chicago City Railway Com- 
pany on February 24. You see how the diversity factor helps 
us out there. Of course, if all these concerns were in one 
company the situation would be different, but taking it as the 



90,000 



80,000 



70,000 TO 



60,000 



50,000 



40,000 



30,000 



20,000 



lOJOO 




10 J2 



Fig. 7 



business exists in Chicago, you will note that not any two of 
them came on the same day. The maximum railway load of 
the year was on February 15, on the day that the Chicago 
Railways Company 's maximum came, not, as you would 
naturally expect, on February 24, the date of the maximum of 
the Chicago City Railway Company, our largest railway 
customer. 

We sell to the railway companies on the basis of the average 
maxima for the three highest days, or consecutive highest days 
of the year, counting the two maxima of the day, namely, 
the morning maximum and the evening maximum. The re- 



90 ADDRESSES OF SAMUEL INSULL 

suit is that we were paid for about 16 per cent less than they 
actually took on an indicated maximum; that is, on a swing 
maximum. That is a very important thing in figuring out 
this contract, because I have never yet struck a railway engineer 
who figured it in at all, or pointed it out to me. We always 
figured the price 16 per cent or 17 per cent higher than it 
actually was. 

The third column of Fig. 6 represents the maxima charged 
for, and the fourth column represents the non-coincident in- 
dicating maxima for the year; that is, the swing maxima for 
the year. The difference between the two is 17.5 per cent 
of the coincident indicating maximum. The difference be- 
tween the non-coincident indicating maxima in February, 1909, 
and the highest coincident indicating maxima (on February 15, 
1909) was 6.5 per cent. 1 

COST OF PRODUCING ENERGY FOR RAILROADS 

A rather interesting diagram is that of Fig. 7, showing the 
variation in maxima for the different hours of the day. Our 
light-and-power business and our street-railway business are 
shown. The steam-railroad load curve is that of the New York 
Central and is added so that we may see the effects of combina- 
tion. The figures are those of a winter day. 

I will leave our figures for a few moments and show you 

1. The following table was a part of the original chart of Fig. 6: 

(The figures represent kilowatts) 

N9n- 

Non- Coincident Coincident 

Maximum Coincident Indicated Indicated 
Charged 1 Hr. Maxima Max. Max. 

for Feb., 1909 Feb. 15, 1909 Feb., 1909 

Illinois Tunnel Co 970 1,105 800 1,080 

North Shore Electric Co 1,570 1,770 1,800 2,600 

Oak Park "L" 4,520 4,900 4,000 4,800 

Metropolitan "L" 3,490 4,350 3,500 4,100 

North western " L ".. 4,317 4,530 5,000 5,400 



Total Elevated 12,327 13,780 12,500 .14,300 

Chicago Railways Co 15,820 17,060 17,900 17,900 

Chicago City Railway Co 27,744 27,960 27,000 28,000 

Total Surf ace Lines.. 43,564 45,020 44,900 45,900 

GRAND TOTAL 58,431 61,675 60,000 63,880 



LARGER ASPECTS 91 

what has been done by some of the steam railroads. The New 
York Central has an investment of about $6,000,000 in power 
stations and cables and conduits. I asked for the figures that 
way, because in selling to the railway companies, while we 
meter the energy at our generating station, we provide the 
cable and conduits for conveying the electricity to the railway 
substations; that is, the street-railway substations. Figuring 
a fixed charge of 12 per cent, which is not unreasonable (that 
would be 5 per cent for money, 5 per cent for depreciation, and 
per cent to cover insurance and taxes), would make a charge 
of $720,000 a year before ever turning a wheel. That is, be- 
fore they attempt to produce any electricity it costs them $720,- 

000 a year. 

The New York Central has a reasonably low cost of produc- 
tion; incidentally it is more than 50 per cent greater than our 
secondary rate to the Chicago City Railway Company. 

I have been somewhat embarrassed in preparing some of 
these diagrams, especially Fig. 1, as I did not want to show my 
costs; 1 but I assure you that we sell electricity on the basis of 
so much to cover our fixed charges and so much as a selling 
price per kilowatt-hour. If we quote 0.4 cent per kilowatt- 
hour we do not expect to quote a price that is lower than our 
cost. The New York Central people's maxima were based 
on what they would have to pay us, not based on their in- 
dicators; their indicators show 15,000 kilowatts. Incidentally 

1 may remark that they have one station that has not turned a 
wheel in two years. Their maximum load, based on what they 

1. This frank statement is very interesting. As a matter of fact, publica- 
tion of the Briarcliff speech was suppressed at the time of the convention, and 
this is its first appearance in print. After the address had been delivered the 
shorthand reporter's notes and transcript were turned over to Mr. Insull, 
and the speech was not even published in the official Proceedings of the Asso- 
ciation of Edison Illuminating Companies, although this book is circulated only 
among members of the association. The official report contained this state- 
ment: "Mr. Insull then delivered his address, which, at his request, has been 
omitted from the minutes." Several years later the author of the address was 
asked why this action was taken, and he answered as follows: "At that time I 
thought that the charts, figures and data used were of such a confidential na- 
ture that it was questionable whether even a private publication should be 
made. I had not then arrived at the conclusion, as I did later, that the best 
way to operate this business is to take the public into one's confidence." 



92 ADDRESSES OF SAMUEL INSULL 

would have to pay us, would be 12,700 kilowatts; that is, 
allowing a 17.5 per cent difference. Their kilowatt-hours 
generated were 44,000,000 and their cost was around 0.6 cent; 
consequently their operating cost was somewhere around 
$275,000. If you take the total fixed charges of 12 per cent 
and add their cost of production, it shows a total cost of $995,- 
000 a year. 

The Pennsylvania Railroad people did a little differently. 
They employed a firm of consulting engineers who put up a 
plant for them at a cost of $3,500,000. I do not know whether 
these figures include cables and conduits; I assume that they do. 
On the same basis of 12 per cent, they have a fixed charge of 
$420,000. Their maximum kilowatts happen to be the same, 
so on our basis of figuring we would reduce the 15,000 kilowatts 
to 12,700 kilowatts. The kilowatt-hours generated were 30,- 
000,000. This company's operating cost is higher than that of 
the New York Central. 

There is one thing I should say, and that is that the difference 
in the price of fuel between the East and West should make a 
substantial difference in the cost of electrical energy how 
much I do not know, so I simply had to make a comparison 
based on our present contract with the street railways. 

The total operating and fixed charges of the Pennsylvania 
Railroad were $630,000, on my basis of figuring, but if you 
combine the two railroads the figure is $1,625,000. Now, that 
is the annual electrical-energy expenditure of the two greatest 
railroad corporations, probably, this side of the Missouri River. 
If they had bought energy at $15 a kilowatt of maximum de- 
mand and 0.4 cent per kilowatt-hour, their total combined 
expenditure would have been $677,000, or a saving of $948,000 
a year. 

A VERY SATISFACTORY CLASS OF BUSINESS 

That statement is not entirely fair. The New York Central 
Railroad will eventually, no doubt, be able to use its entire 
generating plant. But who in this room would ever think of 
building a generating plant and having it stand absolutely 



LARGER ASPECTS 93 

finished and idle for two years after the contractors left the 
work? That is what results from people going into a line of 
business which they do not understand. Similar cases may be 
found in other parts of the United States, and the mistake will 
be repeated again and again by the steam-railroad companies 
unless you people in this room put your shoulder to the wheel. 
If you have not economical plants, provide the capital to put 
them up, and cater for this class of business, which in my 
judgment, is lying right at your feet. It is perhaps the most 
satisfactory business you can get. You deal with very few 
customers. I think at the present time we have $2,500,000 a 
year of it on our books. In all we will get $20,000,000 or more, 
taking the average life of the contracts. You collect your 
money every month without any question. It is the cheapest 
revenue for you to collect. You can turn your capital quicker 
than you can in any other branch of your business. And it is 
easier to give the utilities satisfaction than the man who takes 
two or three lamps in an apartment. In addition, you are in 
a large way of business, producing your supply on a scale of 
some magnitude; you are manufacturing something that 
amounts to something. You are starting to get yourselves in 
a position where you can afford to run your entire small-cus- 
tomer business at a loss, and, gentlemen, you have got to do 
that eventually, if you expect to remain in the business. 

Just dwell for a minute on these figures of the Pennsylvania 
and New York Central railroads. Look at it from our point of 
view. We are all of us interested in the general use of electrical 
energy for all classes of transportation. We hope, if we cannot 
get the big amount of business, that we can catch on to the 
outskirts and get a little of it. Just fancy this business being 
handicapped with a fixed charge in the experimenting days of 
the business, amounting to interest at 5 per cent on $19,000,- 
000, or an amount large enough, probably, to bring another 
great trunk line into the city of New York. 

I almost took a man's breath away yesterday when I told 
him that our average income from one of these large railway 
companies was 0.75 cent a kilowatt-hour last year. But 



94 ADDRESSES OF SAMUEL INSULL 

there is more money in selling that railway company at that 
price than there is in selling some little customer at 10, 12, or 
15 cents a kilowatt-hour. Take column 36 of Fig. 1; that 
demonstrates the fact. If the actual figures were on there, 
you would find that the cost of supplying the average residence 
that uses tungsten lamps is so near the selling price that the 
difference is hardly worth talking about. 

In a way I am not disinterested; I am talking to you with a 
motive. I am trying to get this class of business in Chicago. 
I will go anywhere in the United States to help any of you get 
the same class of business in large units, because the more 
that class of business is canvassed for and is obtained, the 
easier it will be for me to build up the control of the manufac- 
ture of electrical energy in the community in which I live. 
That is the interested point of view from which I am talking. 

A COLLOQUY WITH A PUBLIC-SERVICE COMMISSIONER 

A gentleman came into my office the other day, connected 
with the Public Service Commission of New York I forget 
whether it was the First or Second District who is very 
much interested in the railway proposition. He was sent to me 
by Mr. Mitten, 1 the president of the Chicago City Railway 
Company, a man to whom I owe a very great deal for co-oper- 
ating with me, laying all his cards on the table and showing 
his costs absolutely openly. Mr. Mitten negotiated with me 
on the broad bfe,sis that he did not want to produce energy, and 
that I ought to produce it. On the other hand, I did not want 
to sell it to him unless I could make him a proposition which it 
would pay him to accept, and that meant, of course, a proposi- 
tion which would be certainly as low as his costs. This visitor 
of whom I started to speak wanted some information on the 
purchase of electricity by the railway company. When he 
came I had some of the preliminary charts, which I have showed 
you this evening, lying around, and I showed him what the idea 

1. Mr. T. E. Mitten, now (1915) chairman of the executive committee 
and president of the Philadelphia Rapid Transit Company. 



LARGER ASPECTS 95 

meant. He asked: "Do you mean to tell me that the people 
can get a lower price if there is a monopoly of all these generating 
plants?" "Yes," I answered; "that is exactly what I mean to 
tell you. Our business is run on that theory. At present 
our highest price is 12 cents a kilowatt-hour to the smallest 
customer; but any man who burns light two hours a day, any 
manufacturer who uses more electricity than that equivalent, 
can buy energy from us at nine cents an hour. And he will 
buy it at a much lower price in the future." His next question 
was: "Do you make money?" "No," said I, "we lose money 
if you take that basis of business by itself." Next he wanted 
to know: "What are you after?" My response was: "What 
I am after is getting the lowest possible average cost of pro- 
duction to sell the energy at the lowest possible maximum 
price." Then he demanded: "What are we to do with the 
companies in order to get them to do that kind of business?" 
In turn I asked: "What do you do? Have they done every- 
thing you think they ought to do?" He concluded: "If we 
had the authority, we would try to make them." 

"MAKE YOUR SECURITIES GOOD IN THE MARKETS 
OF THE WORLD" 

Just as sure as grass grows and water runs, the people who 
are running their business on the line suggested by these various 
charts will supply the experience and compel every one of you 
to run your business on that basis. It is good for you that they 
should. Many of you who were present at the Atlantic City 
meeting of the National Electric Light Association 1 heard Mr. 
Frank A. Vanderlip, president of the National City Bank of 
New York, talk on the advantage of raising large sums of money 
for public-service business, instead of small sums of money 
doing business in a large way and you heard him say that 
the financiers liked it and investors liked it. I tell you that 
it has been much easier for me to raise the money to provide 
for the necessary expenditures of our Chicago company since 

1. This convention was held on June 1-4, 1909. 



96 ADDRESSES OF SAMUEL INSULL 

we have been in the business of keeping anywhere from 20,000 
kilowatts to 30,000 kilowatts ahead of our demand than it 
was in the time when I had to raise about one-tenth of the 
money. It is a much easier proposition. I repeat here what 
I said at Atlantic City, addressing myself especially to the 
managers of the small companies: If you are in communities 
where the business is limited, look out for the next community 
and get your two properties together; then try to get still 
another, and so on, until you have an area that will justify 
you in building large, economical stations. If you do that, 
when the steam railroads come to consider the question of 
electrification; when the interurban and urban roads come to 
consider the question of increasing their energy requirements; 
when the manufacturers proceed to enlarge their establishments, 
needing more energy to drive their machinery then you will 
be able to quote prices that will give you the business on a 
basis that will give you a handsome return and make your 
securities good in the markets of the world. 



PRODUCTION AND SALE OF ELECTRICAL 
ENERGY IN CHICAGO 1 

BEGINNING by saying that Chicago is the market place 
of the richest producing valley in the world, Mr. Insull 
remarked that, to assure its continued success and 
prosperity, not only were men needed men possessing the 
characteristics that have made Chicago great but these 
men most have at their disposal material advantages which 
are essential to the industrial, commercial and social life of a 
great city. Among these advantages the possibility of procur- 
ing cheap electrical energy is most important. 

All electrical men, whether in the service of the electricity- 
supply company or in the service of manufacturing corporations 
or engineers advising their clients, are equally interested in the 
development of electric service in the distribution and sale 
of cheap electricity in the community. 

The figures bearing on this business are very interesting. 
There is about $60,000,000 invested at the present time 2 in 
the generation and distribution of electrical energy from central 
stations within the corporate limits of Chicago. One may 
gain a better idea of what this means when he reflects that to 
pay 6 per cent interest on the money invested takes about 
$400 an hour twenty-four hours a day and 365 days in the 
year. To enjoy the right to earn that interest the company 
has to pay, and does pay with pleasure, to the city and state 
an amount in taxes and compensation that exceeds $100 an 

1. On October 20, 1909, Mr. Insull was the principal speaker at a luncheon 
of the Electric Club of Chicago. A large audience of representative electrical 
men listened with interest to the address. The major portion of a report 
made at the time for the Electrical World is reprinted here. 

2. Four years later the bond-and-stock liabilities of the Commonwealth 
Edison Company were about $78,000,000. 

97 



98 ADDRESSES OF SAMUEL INSULL 

hour. The total amount paid this year in taxes and compensa- 
tion is about $900,000.! It is a common thing for the news- 
papers in discussing public-service corporations to indulge in 
criticism relating to the alleged evasion of taxes on the part of 
these corporations. Mr. Insull asked his hearers to believe in 
view of the statement he had just made that such criticism 
did not apply to the company of which he has the honor to be 
the head. 

STATISTICS OF PRODUCTION AND DISTRIBUTION 

It takes an average of more than 100 tons of coal an hour 
8,760 hours a year to produce the energy which the Common- 
wealth Edison Company sells. At certain times in the winter 
this coal must be burned at the rate of from 200 to 250 tons an 
hour. "Fancy," said Mr. Insull, "the engineering brainwork 
that must have been centered in that one proposition how 
to get through the grates 250 tons of coal in an hour. To take 
care of the business, to stand ready to deal with large and small 
consumers as they come along, we have at the present time a 
capacity of 240,000 horse-power, and during this coming win- 
ter the maximum load on our central stations will be upwards of 
200,000 horse-power. I do not know how much electricity is 
being generated by water-power plants at Niagara Falls, but I 
think the amount of electrical energy we get from our steam 
plants here in Chicago will compare favorably with that pro- 
duced by the great plants at the foot of Lake Erie." 

Fifty -four stations and substations are needed to meet the 
various classes of business, from the smallest lighting installa- 
tion to the operation of a railway system. These substations 
have a converting rating of 275,000 horse-power, and the cur- 
rent that passes through them is conveyed by a total mileage 
of 1,255 miles of cable, 4,000 miles of overhead wires and a 
conduit mileage of 2,200. This development has taken place in 
less than thirty years, and in order to take care of the growth of 

1. In 1914 almost $1,500,000 was paid in taxes and municipal compen- 
sation. Similarly nearly all the statistical figures should be increased to 
describe present-day conditions. 



CHICAGO'S ELECTRICITY SUPPLY 99 

the business the company is spending about $4,500,000 a year, 
or nearly $15,000 for every working day of the year. These 
figures give some idea of the investment side of the electric- 
service business in Chicago. 

RATES DECREASE WITH INCREASE OF OUTPUT 

Mr. Insull declared that the kilowatt-hours sold between 
1896 and 1909 had multiplied forty times, and he said that the 
extent of the business was now such that the saving of 0.001 of 
a cent in the manufacture of a kilowatt-hour would amount to 
about $4,500 a year. Forming a striking comparison with the 
increase of the business is the decrease in average rates. The 
company's income for the year 1909 is only 25 per cent per unit 
sold of the income received in 1896. Of course, the gross in- 
come is much larger, but statistics show the decrease of the 
average rate at which a kilowatt-hour is sold. This marked 
decrease in rates has been accomplished by improved apparatus, 
concentration of production and success in selling the greater 
volume of output. 

THE DAY OF THE ISOLATED PLANT HAS PASSED 

The speaker referred to the sale of electricity as a monopoly 
business, and said that an isolated electric plant is as much of 
an anomoly as an isolated gas plant or an isolated waterworks 
would be. He contended that the day of the isolated plant 
has passed, and, whether for supplying electricity to an office 
building or for the electrification of the terminal of a great 
railroad, there is no economical justification for the existence of 
such a plant. 

"I wish to dwell upon this point," said Mr. Insull, "for 
the benefit of those of you who are not engaged in the manufac- 
ture of energy. It you will bend your energies to the sale of 
current-consuming devices, you can build up a business which 
has a permanency; if you bend your energies to competition 
with a power-generating company, I do not care in what city 



100 ADDRESSES OF SAMUEL INSULL 

that company may be located, you are in the course of years 
doomed to failure. It is not among the possibilities in this 
day that electrical energy can be produced by small units in 
competition with the large production on a wholesale basis of 
the generating company." 

Mr. Insull made the interesting statement that in looking 
over the field for his company in Chicago, as near as he could 
figure, the company is doing only about one-third of the possible 
business. This does not refer to the future growth of the city, 
but simply to the possible electricity-supply business in Chicago 
as it exists today. The speaker then called attention to a map 
of Chicago showing the generating and substations of the 
company. Beyond the city limits, too, electricity generated in 
Commonwealth stations is distributed as far north as Milwaukee 
on the north and Kankakee on the south, a distance of about 
140 miles. 

POSSIBILITY OF RAILROAD-TERMINAL ELECTRIFICATION 

In closing, Mr. Insull emphasized the fact that the interest 
of all members of the Electric Club should be as one in extending 
the use of electricity. The producing company is engaged in an 
effort to produce the largest amount of electrical energy at the 
lowest possible selling price. The claim is made for Chicago 
that it has the lowest selling price of any large electric-supply 
company in the world. Taking the whole schedule of rates 
through, it is believed that electricity is sold cheaper in Chicago 
than anywhere else on either side of the Atlantic where energy 
is produced from steam-driven stations or even from water- 
power stations established as commercial propositions to make 
money. This fact should mean a great deal to those who 
represent manufacturing companies. If electricity is cheap 
there is, of course, a greater inducement to use current-con- 
suming devices. 

The cheap electricity available in Chicago should have an 
important bearing upon the agitation in relation to electrifying 
the terminals of the steam railroads. There are, of course, 
important problems to be settled before this electrification can 



CHICAGO'S ELECTRICITY SUPPLY 101 

be accomplished, and it is well for all who are not steam-rail- 
road men to treat these problems with respect. But so far as 
the energy-producing side of the argument is concerned, it is a 
mistake to say that electrification is impossible because of the 
cost of electrical energy. If this objection is based on a knowl- 
edge of the cost of electrical energy used for the electrification 
of steam-railroad terminals around New York, it is based on 
false premises if it is contended that the same cost of electrical 
energy must apply in Chicago. It is a fact that electrical 
energy can be bought in Chicago considerably cheaper than 
it is now being produced by the two great traffic lines which are 
engaged in electrifying their terminals in New York. 

Mr. Insull said that he would be glad to answer any ques- 
tions put to him, and when the applause following his address 
had subsided one visitor asked whether in case the railroad 
companies in Chicago should decide to electrify their terminals, 
using energy purchased from the Commonwealth Edison Com- 
pany, it would be necessary for that company to build new 
generating stations to care for this demand. The answer of 
Mr. Insull was that his company could take care of any two 
railroad terminal electrifications in Chicago, based on the 
present consumption of electricity by the roads running into 
the New York Central station in New York, with the present 
rating of the Edison stations. With additional equipment 
which has been ordered to go into service within a year, two 
additional terminals of like capacity could be served. 

HEATING DEVICES AND THE QUESTION OF PROFITS 

Mr. F. J. Holmes asked how much of a factor in the growth 
of the business the placing of electric-heating devices on the 
circuits of the company was proving to be. Mr. Insull an- 
swered that this was a difficult question to answer. He spoke 
of the company's recent flatiron campaign, but said that it would 
be difficult to trace exactly the amount of load due to electric- 
heating appliances. The speaker said that some years ago he 
tried to figure out the effect of fan motors on the business, but 



102 ADDRESSES OF SAMUEL INSULL 

he had to relinquish the idea of getting exact information, as 
anything like fan motors or electric-heating appliances, that 
are more or less a matter of general daily use among the 70,000 
or 80,000 customers of the company, are difficult to trace as a 
component part of the total load. Mr. Insull added that he 
thought the reduction in the rates had had the effect of en- 
couraging the use of heating devices. 

Mr. J. W. Mabbs, superintendent of the Board of Trade 
Building, referred to the reduction in average rates and said 
that it would be interesting to have a curve of profits to compare 
with it. To this remark Mr. Insull made answer to the effect 
that if there were no danger from competition he would be 
glad to disclose in exact figures the profits of the company, 
showing the small margin remaining for this purpose. 



THIRTY YEARS OF ELECTRICAL DEVEL- 
OPMENT 1879-1909 1 

IT IS a very great pleasure to me to look back over the last 
thirty years. I think it is about thirty-one years ago when 
one night in November, 1878, 1 was standing upon a dingy 
platform of the Metropolitan Underground Railroad of London 
a railroad that in my boyhood days we used to call "the 
Sewer" waiting for a train to take me to the house of one of 
the leading editors of one of the London weeklies, into whose 
service as shorthand writer (or shorthand clerk, as the expression 
was then in England) I had entered to eke out the small salary 
I got in the City during the day. My eye happened to rest 
upon an American magazine at a bookstand, and as I had a 
ride of some half or three-quarters of an hour before reaching 
my destination, I bought that magazine. In it I found, merely 
by accident, a very entertaining article descriptive of the 
work of a man whose name, although well known in America, 
was comparatively little known outside of the United States, 
but a name that today is a household word wherever current 
literature circulates. I refer to the name of Mr. Thomas A. 
Edison, the inventor. 

At that time we hardly knew of the existence of the tele- 
phone. But few in the world knew anything about electric- 
lighting experiments. The article that I read that night af- 
fected my career in a way that I little thought on that occasion, 

1. Address delivered at the fourteenth annual meeting and dinner of the 
Electrical Trades Association of Chicago at the University Club, Chicago, 
November 12, 1909. This speech is particularly interesting by reason of its 
autobiographical and historical data. It shows its author's "human interest" 
in the great industry with which he is identified. A pleasant incident of the 
dinner was the drinking of Mr. Insull's health, the toast being proposed by 
Mr. Charles E. Brown, the toastmaster, in honor of Mr. Insull's fiftieth birth- 
day, which fell on the preceding day. 

103 



104 ADDRESSES OF SAMUEL INSULL 

for within three months after that time, by an accident, purely 
an accident, after being engaged by an American who had an 
office in Lombard Street in London, I found I was private 
secretary to Mr. Edison's European agent. 

Looking at it today, when every branch of electrical work 
has been developed to so great an extent, it seems almost im- 
possible to realize that at that time, when I was on the thresh- 
old of my career in the electrical business, there was little or 
nothing in the way of telephone service. (I am now speaking 
about the time of January, 1879.) There were a few telephone 
exchanges in this country. My friend Mr. Sunny, 1 who en- 
tered the service of the Chicago Telephone Company in May, 
1879, informs me that probably there were two or three ex- 
changes in Chicago. We find that the record shows that the 
first one was opened in New Haven some time during the pre- 
vious year, 1878; but you could not find anywhere outside of the 
United States in the spring of 1879 a telephone exchange. 
The first one erected in London was, I think, put in service 
some time in the fall of 1879, and it was my privilege to operate 
it for the first half -hour that it was in operation. 

If you go a little farther back than thirty years ago, you will 
find that the only source of electrical energy was the voltaic 
battery, and it is not until early in the seventies that you can 
discover anything in the records descriptive of the dynamo as 
a producer of electricity, such as we know it today. Little or 
nothing at that time had been accomplished in connection with 
electric lighting. In Europe some work had been done by 
Werner von Siemens and some of his associates, and there was 
a distinguished Russian engineer by the name of Jablochkoff 
who had produced what was known as the Jablochkoff candle, 
a form of arc lamp which was exhibited on the Avenue de 
1'Opera in Paris in 1878, and a few months later on the Thames 
Embankment and Waterloo Bridge in London. 

Mr. Jablochkoff' s efforts, although of great consequence in 
the development of the art, outlived his first experiments only 

1. Mr. Bernard E. Sunny, president of the Chicago Telephone Com- 
pany and several other telephone companies (1915). 



THIRTY YEARS IN RETROSPECT 105 

a very few years, and I think never amounted to anything in 
this country except that in 1881 a few lamps were put on ex- 
hibition by my lamented friend, Mr. Charles Cheever, who made 
quite a reputation in connection with the early introduction of 
the telephone. 

THE INVENTION OF THE TELEPHONE 

We have to go back to the Philadelphia Centennial Ex- 
position of 1876, where Alexander Graham Bell first exhibited 
an instrument that carried the utterances of the human voice 
imperfectly over a wire by means of electricity. I have an old 
friend in New York who has been in the electrical business a 
few years longer than I have myself, and who tells me that he 
visited the Centennial Exposition and saw the first exhibition 
of the telephone, when Dom Pedro of Brazil was visiting the 
exposition. There are some enthusiastic admirers of Mr. 
Edison who declare that they saw experimental instruments in 
use at Menlo Park a little prior to that, which gave as much in 
the way of conversation as the work of Mr. Bell. 

I think, and I have no doubt that all in this room think, 
that the credit for the invention of the telephone must be given 
to Alexander Graham Bell, just as I think that the credit for 
the invention of the carbon transmitter that we all use today, 
whatever may be the claims of other inventors, must be given 
to Thomas A. Edison. 

ELECTRICAL SUPPLY DEALERS OF THIRTY YEARS AGO 

Take your own line of business. What was its situation 
thirty years ago? There was little or nothing known of an 
electrical supply organization. The only material to be sold 
was material for telegraphic work and house-bell work. There 
were three supply houses in New York Tillotson's, BunnelPs 
and that of Charles T. Chester. The Western Electric Com- 
pany, whose headquarters as you all know are in this city, 
had a branch at that time in Church Street, New York, and it 
did more or less of a supply business. 



106 ADDRESSES OF SAMUEL INSULL 

At that time the greater part of the supply business was 
done by mail on special orders, and about the only concerns I 
can find any record of were Partrick & Carter of Philadelphia, 
Watts of Baltimore, Buell of Cleveland, and Charles Williams, 
Jr., of Boston, who was afterward taken into the Western 
Electric Company. I believe my old friend, Mr. E. T. Gilli- 
land, also did more or less of a supply business in Indianapolis. 
But what we know as the electrical supply business as we have 
it today had practically no existence then. 

I can remember when I arrived in New York in 1881, 
Tillotson's and BunnelPs (I think the latter was J. H. Bunnell 
& Company and I think the style of Tillotson's concern was 
Tillotson & Sons) had establishments somewhere in the neigh- 
borhood of the then and present Western Union Building, on 
the side streets near 195 Broadway. If you went into their 
stores, you found that they resembled more a storehouse of 
one of the big iron- wire concerns than what we would consider 
an electrical supply store. The business was of little or no 
consequence, and in contrasting the situation as it existed then 
and as it exists now we are forced to the conclusion that the 
business in which we are all engaged is really a product of the 
last quarter of a century. 

Take the situation of the telegraph and cable lines. If you 
wanted to send a message from New York to London at that 
time, my recollection is it cost a dollar a word. I was more 
familiar with it from the other end of the line, however, and it 
used to cost us four shillings a word. 

Take the telegraph tolls in the United States. Mr. Sunny 
informed me today that the telegraph rate between New York 
and Chicago thirty years ago was $1.15 for ten words, and the 
rate between New York and San Francisco was five dollars 
for ten words. 

Thirty years ago we were on the threshold of enormous 
industrial changes the world over, and the greatest of those 
industrial changes have been changes that have brought us the 
telephone, the electric light, the electrical transmission of 
power, the electric railway, the wireless telegraph and the hun- 



THIRTY YEARS IN RETROSPECT 107 

dred and one small things that have followed in the wake of these 
various enterprises. 

THE BEGINNINGS IN ELECTRIC LIGHTING 

In 1879 the only electric-light service that anything was 
known about in this country was the work of Mr. Brush, of 
Cleveland, Elihu Thomson, Professor Houston and a few others 
who were engaged in series arc-light business. 

Mr. Edison's work on incandescent lighting was just being 
talked about. I think it was in December, 1878, that it was 
first discussed in the public press. This discussion was fol- 
lowed by a rather sensational drop in the price of gas shares the 
world over; but it was not until about a year later, in 1879. 
that Mr. Edison made his first exhibition at Menlo Park of his 
paper carbon lamp, and it was not until the summer of 1880 
that any of those experimental lamps found their way outside 
of the laboratory. It was my privilege in August, 1880, to 
see one of Mr. Edison's first lamps lighted up to a dull red in 
the basement of a building in Queen Victoria Street, London, 
the energy for lighting the lamp being supplied by about forty 
cells of Grove battery. 

When I came to this country on the first day of March, 1881, 1 
the discussion in the public press with relation to electrical 
matters turned on whether Edison, to use a popular expression 
of that day, had succeeded in subdividing the electric light, or 
whether the claims that he made of success in that direction 
were simply the vaporings of a wild imagination. There were 
very few people on either side of the Atlantic who had any 
belief whatever in what had been accomplished up to that 
time. 

Notwithstanding the fact that there was a complete system 
of underground distribution I should say a complete two- 
wire system of underground distribution fed by feeders from 
a central point, and that that system was operating lamps 
and motors in multiple out at Menlo Park, there were, as I 

1. This should be February 28, 1881. See note on page xxvi. 



108 ADDRESSES OF SAMUEL INSULL 

say, very few people who had the slightest belief in the com- 
mercial value of Mr. Edison's work. 

On the second night that I was in this country, I was taken 
out to Menlo Park by Mr. Edison. We arrived there about nine 
o'clock in the evening, and I well remember how surprised I 
was to see the fields around his laboratory, the houses of himself 
and his assistants, all illuminated by this wonderful new light, 
using a carbon-filament lamp a decided improvement on the 
paper-filament lamp which I had seen in London. I recall 
that I was quite impatient on that occasion to run down to the 
railroad station from the laboratory, about half a mile away, 
to send a cable to my friends in London, telling them that I 
had seen Edison's system in operation. About ten or twelve 
days later I received an acknowledgment from the man to 
whom I cabled, a man who is now the representative of the 
Western Electric Company in London, in which he said he sup- 
posed I had been in America just about long enough to be able 
to draw the long-bow as well as any of those Yankees with 
whom I had been associating. 

It is a matter of very great interest to those of you who follow 
the engineering side of this business to know that this first 
exhibition of Edison's electric lighting system at Menlo Park 
obtained its power partly from a direct-connected unit, com- 
posed of a dynamo of Mr. Edison's design, and an engine 
manufactured by Mr. Charles T. Porter, the engine being of the 
type commonly known throughout the country as the Porter- 
Allen engine. I think it was possibly about 60 horse-power, 
and my recollection is that it ran somewhere between five and 
six hundred revolutions per minute. 

It is rather remarkable that the first engineering effort in 
connection with the development of the great industry which 
goes such a long way toward supporting practically all of the 
businesses represented in this room, outside of the telephone 
interest, should have been so correct as to be composed of 
a class of apparatus that we all went back to a quarter of a 
century afterwards. I think this fact is one of the greatest 
tributes to Mr. Edison's engineering ability. 



THIRTY YEARS IN RETROSPECT 109 

THE STARTING OF CENTRAL STATIONS 

You must excuse me if, in reviewing electrical progress 
during the last thirty years, I mention the name of Mr. Edison 
so frequently; but as I understand electrical development, it is 
impossible for me to do otherwise. If you will study the 
records of the United States Patent Office, you will be forced to 
the conclusion that at least from one-half to three-quarters of 
the electrical development which we enjoy at the present time 
can be traced fundamentally to the great intellect, the great 
genius, of the man under whose name it has been my privilege 
to work for thirty years. 

It was not until 1882 that the first central station for in- 
candescent lighting was put in operation in New York city. 
At that time the telephone business had attained considerable 
proportions. The old fight in this country between the Bell 
interests as represented by the American Bell Telephone Com- 
pany, and the Edison interests as represented by the Western 
Union Telegraph Company, had been settled, and the entire 
telephone business was operated then, as it is largely now, as a 
monopoly business. 

About the same time that the central-station electric- 
lighting plant was started in New York on Pearl Street, just 
south of Fulton Street, there was a small plant started at Ap- 
pleton, Wisconsin. I think, largely on account of its small size 
and the ease with which the smaller apparatus could be pro- 
duced, the chances are that the Appleton plant started before 
the New York plant, and therefore the Central West probably 
can lay claim to the honor of starting the first commercial 
incandescent-lighting distribution system in the world. 

There had been various efforts made in Europe, but they 
were mainly in the direction of series lamps ; that is, lamps of 
low resistance run in series. But all systems of that character 
have long since disappeared as being uncommercial, and the 
only system in existence the world over today is the multiple- 
arc system, using high-resistance illuminants. 

Soon after the starting of the New York and Appleton 



110 ADDRESSES OF SAMUEL INSULL 

plants there were plants started in London, but only for ex- 
hibition purposes. There were plants started about that time 
in Santiago, Chile, and in Milan, Italy. 



VARIOUS STEPS IN THE MARCH OF PROGRESS 

To go back to 1879: The first miniature electric railway 
carrying passengers was put in operation at the Berlin Ex- 
position, by Siemens & Halske, in that year. It was purely an 
exhibition plant, and it was not until two years later that any 
commercial road was put into operation in Europe, and that 
was a small one outside of Berlin, a mile and a half long. Not 
long after (in 1883, to be exact) there was a similar exhibition 
here, in Chicago, on the Lake Front, in the old Exposition Build- 
ing where the Art Institute now stands. There may be some 
in this room who remember it. It was a little circular rail- 
road, not to carry passengers but just a toy railroad, which 
operated, I think, one car. 

Electrical events came in rapid succession; but it is an in- 
teresting thing to note that it was not until 1881 that there was 
any official definition of any of the electrical units, and it was 
at the Paris Electrical Congress of 1881 that the ohm, the volt 
and the ampere were first authoritatively defined as the basis 
for legislative action in the various countries. 

It was in this same year that a "box of electrical energy," 
what we call the storage battery of today, was carried from 
Paris to Glasgow by Sir William Thomson, afterward Lord 
Kelvin. It was one of the early storage batteries, and was 
made by Camille Faure. The unique demonstration attracted 
a great deal of attention at that time, but it was years after- 
ward before the Faure cells came into general use. 

At the Paris Exposition of 1881 was the first demonstration 
of a direct-connected dynamo and engine outside of Menlo 
Park. I had the privilege of having a great deal to do with 
the manufacture of that first unit in New York and its shipment 
to Paris. Mr. Edison's exhibit in Paris of that unit was made 
by Mr. Charles Batchelor, one of his earliest assistants. 



THIRTY YEARS IN RETROSPECT 111 

Between 1882 and 1886 the alternating system supple- 
mented the direct system and came into general use, and some 
time during that same period the three-wire system of Edison 
was put into use. By this great improvement in wiring the 
amount of copper necessary for the direct-current system was 
cut down so that we got along with about 40 per cent of the 
copper originally required. 

The introduction of the alternating system and the Edison 
three-wire system gave a tremendous impetus to the electric- 
lighting business. It was but a very few years before the 
electric-lighting business assumed proportions rivaling those 
of the telephone industry, and we began to see the springing up 
all over the United States of establishments for the sale of 
apparatus. From my own personal experience, and much to 
my own cost, I can assure you that at that time we needed a 
credit association very badly indeed. 

The electric welding of Elihu Thomson was first brought out 
in 1886. 

The first serious efforts at electric-railway work in this 
country were made in 1888. Some years earlier, in 1880, Mr. 
Edison had built an experimental road at Menlo Park, and 
Mr. Stephen D. Field had done considerable work in connection 
with electric railways; but it was not until 1888 that Mr. 
Frank J. Sprague's first electric road was started at Richmond, 
Virginia. We have in this city at least two men who were en- 
gaged on that work Mr. A. D. Lundy, of the firm of Sargent 
& Lundy, and Mr. Frank J. Baker, the vice-president of the 
North Shore Electric Company. 1 

CENTRAL STATIONS AND POWER TRANSMISSION 

In that same year, 1888, the first central station was estab- 
lished in the city of Chicago. At that time there were a large 
number of isolated plants, in fact I think more in Cook County, 
in proportion to population, than in any other part of the United 

1. Later the North Shore Electric Company was merged in the Public 
Service Company of Northern Illinois, of which Mr. Insull is (1915) president 
and Mr. Baker one of the vice-presidents. 



ADDRESSES OF SAMUEL INSULL 

States, but no efforts had been made in the direction of central- 
station work here until some time in 1887, when the Chicago 
Edison Company was formed. It was in 1888 that the first 
Edison central-station plant in Chicago was started at 139 
Adams Street. 1 When I came to Chicago in July, 1892, I 
think that the plant had arrived at the enormous proportions 
of somewhere between three and four thousand horse-power. 
I think they used to try to run a little more than that, but that 
was about our limit at that time. 

It was in 1888 also that Mr. Nikola Tesla contributed very 
materially to the development of the alternating side of the 
business. His polyphase-current patents, which forms the 
basis largely of the alternating dynamos and motors of today, 
were taken out at this time. 

Probably the Paris Exposition of 1889 was the milestone 
which signalized the great progress of the electric-lighting art 
the world over. At that exposition, or rather at a congress 
held at the time of that exposition, we first heard of the watt. 
It was authoritatively defined by the International Electrical 
Congress of that year, and what today is a household word with 
all the people who have to pay for electricity on a meter basis 
the much-discussed "kilowatt" has grown out of the defi- 
nition established by the authorities at the Congress of 1889. 

The first electric-power transmission dates from 1890. 
There was a system laid out in a small town in Colorado, at 
one of the mines in that state. 2 

The progress of the electric-lighting art was signalized 
further by the Chicago World's Fair of 1893. That was, above 
everything else, an electrical display. We find that there 
they went back to the direct-connected dynamos, using marine 
types of engines for the purpose. Two of those engines which 
were shown at the World's Fair are still (1909) in use at the 
Harrison Street station of the Commonwealth Edison Com- 
pany. 

1. Now 120 West Adams Street. See note on page 319. 

2. The famous Lauffen-Frankfort experimental transmission in Germany 
was also accomplished in 1890. 



THIRTY YEARS IN RETROSPECT 113 

X-rays were discovered by Roentgen in 1895, and in the 
same year Marconi effected communication by wireless tel- 
egraphy in Italy for the first time. 

THE STEAM TURBINE AND WHAT CAME AFTER IT 

Since then we have had the most wonderful progress. We 
have had the steam turbine, the first large unit being started 
in this city in 1903. I refer to the steam turbine of American 
manufacture. Prime movers of this type had been made with 
more or less success in different parts of Europe, and especially 
in England, a number of years before the year mentioned; 
but the large use, or rather the use of large units as we under- 
stand them in the central stations of today, where we use units 
running up to as high as 22,000 horse-power, dates as recently 
as October 2, 1903, when the first unit was started in the Fisk 
Street station of the Commonwealth Edison Company, Chicago. 

I have tried to survey as rapidly as I could the develop- 
ment that has taken place in this wonderful industry with 
which we are all connected, in the short space of thirty years 
a little over a quarter of a century, a period which is covered 
by the years of most of us in this room, simply dating from our 
boyhood days, when we were able to read and understand what 
was going on in the world. 

Some of the figures of the investments in this business are 
simply stupendous. In this city of Chicago alone there is 
probably invested in electric lighting, telephones, the electric 
portion of the street railways and the elevated railways, and 
the isolated electric lighting plants throughout the city, a 
sum which must exceed $500,000,000. 

Just imagine for a moment what that means. Here we 
are, engaged in a business that a little over thirty years ago 
was never dreamed of, and today we have as customers of the 
concerns which are represented in this room, businesses that 
employ a capital of $500,000,000. The figures are simply 
stupendous. 

There are at the present time 6,100,000 telephones in use in 



114 ADDRESSES OF SAMUEL INSULL 

the United States, and the amount invested in exchanges and 
the lines connecting same is upwards of $550,000,000. 

There is a track mileage of electric and interurban railways 
of 40,247 miles, using 89,216 cars, and representing capital 
liabilities of $4,557,000,000. Of course, these figures represent 
capital liabilities, and probably some of that capitalization is 
water; but I personally would very much doubt if the capital 
invested in electric street and interurban railways at the present 
time, that is the cash capital, the actual dollars put in, is less 
than $3,000,000,000. 

To turn again to electric-lighting investments. There are 
about 6,000 central stations in the United States today. Of 
this number upwards of 3,000 of the companies engaged in 
central-station work are also in the electrical supply business 
a business that twenty-five or thirty years ago had perhaps 
half a dozen representatives. 

The central-station companies of the country have an in- 
vestment of $1,250,000,000. They have a gross income of 
more than $250,000,000 a year, and they develop somewhere 
between 2,000,000 and 2,500,000 horse-power. 

The total investment engaged in the three departments of 
the business on which you gentlemen in this room depend for 
your business exceeds the sum of $6,000,000,000. That entire 
business has been created, first, by the wonderful success of 
the electrical inventors of this country, who have had no rivals 
in what they have been able to accomplish anywhere on this 
earth; second, by the wonderful confidence of the capitalists 
of the country in the ability of those inventors to produce that 
which would be commercially successful; and, third, by the 
adaptability of the people of this country to seize upon new 
things which are conducive either to their comfort or to the 
economy of their manufacture or to the improvement of their 
means of communication and transportation. 

I think, gentlemen, we can all congratulate ourselves, first, 
in being privileged to take part in this remarkable business, and 
second, in being located in a country where whatever new things 
may come along, if they are things which recommend them- 



THIRTY YEARS IN RETROSPECT 115 

selves alike to the capitalists who provide the money and the 
users who provide the revenue from day to day, are promptly 
adopted. All I can hope is that the success of the last thirty 
years is only an indication of the great advances that all of us 
hope, and many of us believe, are likely to take place in this 
wonderful electrical business, in which we are all so proud to be 
engaged. 



"SELL YOUR PRODUCT AT A PRICE WHICH 

WILL ENABLE YOU TO GET A 

MONOPOLY" 1 

WE DO NOT do the largest business in the world, but 
I think we have the largest output. Probably the 
company that comes next to us is the New York 
Edison Company, and the next to that is the one in Berlin, 
Germany. The New York Edison Company has an income of 
about $15,000,000 and about 70,000 customers. We have an 
income of about $10,000,000 and about 100,000 customers. 
In our experience the most effective way of getting business is 
through newspaper advertising. 

Our average income from our customers is about 2.5 cents 
per kilowatt-hour. We have customers who take from us 
1,000,000 to 1,500,000 kilowatt-hours a year, and there are 
customers who buy from us as low as 0.75 cent per kilowatt- 
hour, metered at our station switchboard. The lesson to draw 
from this is that if you want the best possible results from the 
manufacture and distribution of electrical energy you have got 
to sell your product at a price which will enable you to get a 
monopoly. I am not speaking now merely as the president 
of the Commonwealth Edison Company. I operate plants in 
different parts of the country as small as any of those repre- 
sented in this room. If you will bring your price down to a 
point where you can compel the manufacturer to shut down 
his private plant because he will save money by doing so; if 

1. The initial convention of H. M. Byllesby & Company and affiliated 
companies was held in Chicago on January 5-7, 1910. Mr. Insull addressed 
the convention briefly on January 6, and a portion of his remarks is given. In 
introducing him, Mr. Byllesby referred to the Commonwealth Edison Com- 
pany as "the largest manufacturing concern of its kind in the world." Hence 
the opening sentences in the text. 

116 



GETTING THE LARGE BUSINESS 117 

you can compel the street railway to shut down its generating 
plant; if you can compel the city waterworks, whether pri- 
vately or publicly owned, to shut down its power plant because 
of the price you quote then you will begin to realize the pos- 
sibilities of this business, and these possibilities may exceed your 
wildest dreams. 

A short time ago a friend of mine drew for me a series of 
circles which showed me that the entire steam-railroad system 
of the country east of Chicago could be operated better and 
more economically by taking advantage of the centers of 
electrical production than the railroads could possibly do if, 
in electrifying their roads, they produced the requisite energy 
in individual plants. 

Look to make your money out of the large business. What 
is large here in Chicago may be beyond, perhaps, what you can 
get in most of the communities that are represented in this 
room this afternoon. Nevertheless, I am sure that if you will 
follow the methods that we follow here, applying them to the 
conditions of the place in which you live, you will assist in 
creating a class of securities that will stand well in the markets 
of the world. That is the only way that we can expect that 
eventually this electric-service business will be brought to the 
success which it deserves. 



THE OBLIGATIONS OF MONOPOLY MUST 
BE ACCEPTED 1 

IT WAS my great privilege to be associated with Mr. Edison 
in the earliest commercial work that he undertook in New 
York City, and only a month or so after I had joined his 
forces, our honored host of this evening joined the engineering 
department of the old Edison parent company, which was the 
pioneer in the development of the incandescent-lighting in- 
dustry. 

When we bear in mind what has been accomplished in 
the short time since the first central station was established in 
New York in 1882, and when we remember that the original 
money invested by the Edison Electric Illuminating Company of 
New York earned dividends for its stockholders without any 
additional capital being supplied to bolster up that originally 
put in, we can, with understanding, appreciate the strength and 
stability of the industry with which we are connected, and the 
great possibilities which must come to it in the future, if we 
give it that same attention in regard to details and develop- 
ments which those connected with the industry have given us 
in the past. 

Mr. Byllesby has occupied in this industry by no means a 
minor position. I think, probably, on the commercial side of 
the business, he is as much entitled to credit as any one man 
in the development of the alternating system which has done so 
much in enabling us to establish large generating plants, giving 
us the opportunity for great economy of production, and estab- 

1. A speech made on January 7, 1910, at the dinner at the Congress 
Hotel, Chicago, following the first convention of H. M. Byllesby & Company 
and affiliated companies. Mr. Byllesby was toastmaster, and he referred to 
Mr. Insull, in his introduction, as "the largest producer of electricity in the 
United States." The report of Mr. Insull's speech has been slightly condensed. 

118 



OBLIGATIONS OF MONOPOLY 119 

lishing large distributing systems, which have added so much 
to the possible profits of this business. 



REGULATION, BOTH AS TO RATES AND ISSUING OF SECURITIES, 
MUST BE ACCEPTED 

Our friend, Mr. Dawes, 1 has referred to the tendency of 
the times so far as legislation is concerned. While as an ab- 
stract proposition I think it is very laudable for us to cheer the 
idea that we should go out and fight any curtailment of our 
liberty of action, as suggested by Mr. Dawes, yet, as a practical, 
everyday proposition, and as a necessity, we have to face the 
views of the various communities of the states in which we are 
engaged. We should bear in mind, above everything else in 
the operation of our business, that we cannot afford to place 
ourselves in opposition to public opinion. If we are to main- 
tain values of the securities for which we are responsible, and 
to increase those values, we should rather bend our energies 
to find some means of operating our business to meet the con- 
ditions that will undoubtedly confront us in most of the states, 
certainly the states in the Mississippi Valley. 

I think it was some twelve years ago that I first tried to 
voice the idea that our business is a natural monopoly and 
that we must accept, with that advantage, the obligation which 
naturally follows, namely, regulation. 

For my own part, I cannot see how we can expect to obtain 
from the communities in which we operate, or from the state 
having control over those communities, certain privileges so far 
as a monopoly is concerned, and at the same time contend 
against regulation. Further, I think that regulation of the 
price of our product must be followed by regulation as to the 
issuance of securities, because our price must depend upon the 
fixed charges we have to pay ; and I cannot see how those fixed 
charges can be kept down within proper limits unless the au- 
thorities, in some way, either the community or the state, 

1. Mr. Charles G. Dawes, president of the Central Trust Company of 
Illinois. 



120 ADDRESSES OF SAMUEL INSULL 

have the right to state the terms on which these securities 
shall be issued. 

I am not proposing to get into a controversy with Mr. 
Dawes on this subject, but I think we will greatly strengthen 
our position, and greatly strengthen the securities issued against 
our business, if we accept the inevitable, and instead of trying 
to oppose the handwriting on the wall, try, rather, to direct 
the tendency so indicated toward getting legislation which will 
enable us to conduct our business in a way satisfactory to 
ourselves and a way satisfactory to the public. 

THE VALUE OF FRANCHISES 

The franchise proposition has never seemed to be a really 
serious one to me. My great trouble has always been to get 
the money for further development. If I managed to get the 
money, I always found I could live under any franchise given 
by any fair-minded community. We have had an instructive 
experience in the last few years in this community in relation to 
franchises and, indirectly, in relation to the matter of capitaliza- 
tion. We have had here two great street-railway companies. 
One was supposed to be run very conservatively, so that for 
every dollar of stock issued the actual cash was paid in. That 
particular company was looked upon as the bulwark of con- 
servatism. On the other hand, we had another large company, 
doing double the business of the so-called conservative company, 
capitalized on a very extravagant basis. Now, the franchises 
of the two companies ran out. What did we find when those 
franchises expired? We found this so-called ultra-conservative 
company, which had never issued a share of stock without hav- 
ing the actual money paid in for the shares issued at par we 
found that that company, which was supposed to have been 
operated in such a conservative way, had for a long period of 
years not allowed a single cent for depreciation. When it 
became necessary to put a value on its property for the purpose 
of arriving at a new franchise arrangement with the city of 
Chicago, the value placed was below that of the issues of the 
securities of the company. 



OBLIGATIONS OF MONOPOLY 121 

Take the other company, where the financing was of a more 
balloon-like character, where the manager should have been in 
the water business instead of the street-railway business. 
Take also the suburban companies, to which Mr. Dawes has 
referred. We found that those companies had securities out- 
standing out of proportion to the cash investment. The 
people who held those securities were laboring under a mis- 
apprehension as to the real value of the franchises. As a 
result, Chicago has got rather a bad name on the subject of 
issuing franchises, whereas our authorities should have obtained 
the commendation of everybody interested in the business when 
they granted to the street-railway corporations franchises, 
because these franchises practically settle for all time the street- 
railway question in this community. 

I had not intended to speak on this subject at all, but 
we cannot afford to oppose public opinion, and I think the best 
course we can pursue, if we want to help the properties in which 
we are interested, is to find the protection we want in the way of 
monopoly, giving way to the demand of regulation, but de- 
manding in return a fair regulation and a fair valuation, which 
I believe we can get if we show to the people the value of the 
brains we have put into the business, which brains we have as 
much right to capitalize as the actual cash put in. As far as 
I have been able to find, companies operating in states where 
there is regulation, such as Wisconsin and New York, which 
are two of the most recent examples where there is a state-regu- 
lation law I say, so far as I have been able to find, the com- 
panies who have had to appeal to those state commissioners 
have enhanced the securities of the properties which they have 
outstanding, provided those securities recommend themselves 
as reasonable in amount. 

THE WAY TO BUILD UP THE BUSINESS 

I thought it might be interesting to some of you people to 
know what we are doing here in Chicago in the development of 
our business. It was only as recently as 1888 that the first 
central station was started here in Chicago. In 1892 we had 



122 ADDRESSES OF SAMUEL INSULL 

4,000 horse-power, with a capital investment of $1,000,000, 
and a gross business of $375,000 a year. At the present time, 
we have power stations with 300,000 horse-power, and a capital 
investment of $60,000,000 in our business, as shown by a valu- 
ation made by my friend, Mr. Byllesby. Our total business 
is more than $12,000,000 a year. We supply energy to all 
the street railways. We cover a territory of 65 miles along the 
shore of Lake Michigan and stretching inland for 2,500 square 
miles, an area double that of Rhode Island, and having a popu- 
lation as great as the state of New Jersey or the state of Wis- 
consin. We are aiming here, through three different companies 
co-operating together, for a centralization or production of 
electrical energy, and look forward to covering a territory 
having a population of five million within our distribution area 
and supplied by one set of generating plants. 

As I look around this room and see the names on the various 
flags representing the various communities in which H. M. 
Byllesby & Company are operating, naturally the thought 
occurs to me what are the possibilities surrounding the territory 
in which you now do business? There is no reason why you 
should not do relatively in the smaller communities exactly 
what we do in this large community and the territory surround- 
ing it. 

The surest way to build up your business and to serve 
your community and you can only serve it satisfactorily if 
you reduce your rates to a minimum the surest way you can 
add to the stability of the local companies that go to make up 
the strength of H. M. Byllesby & Company is to do every- 
thing you can to bring down the cost of production in your 
generating stations and so to serve the public as to obtain 
and retain its good will. Do not run counter to the prejudices 
and opinions of the people, and keep out of politics all you 
possibly can. 



PRESENTATION OF THE EDISON MEDAL 
TO ELIHU THOMSON 1 

IT IS with peculiar pleasure that I rise on this occasion. A 
few of us, several years ago on the occasion when the 
Institute entertained Mr. Edison to celebrate the twenty- 
fifth anniversary of the introduction of his incandescent light- 
ing system, 2 thought that it would be well to perpetuate his 
name, if such a thing seemed at all necessary, by presenting the 
Association with a fund to enable it to make an annual presen- 
tation of a medal and certificate of meritorious achievement in 
electrical engineering. That the first recipient of the medal 
should be your honored guest of this evening has seemed to us 
peculiarly appropriate, for Professor Thomson, by reason of 
his commanding ability and of his lovable personality, has in 
recent years endeared himself to what might be called the " Old 
Edison Guard" just in the same way as he endeared himself 
to our former opponents in business, the gentlemen connected 
with the Thomson-Houston Electric Company. We who organ- 
ized the Edison Medal Association feel deeply grateful to your 
committee that the honor to be conferred this evening should 
fall to the lot of Elihu Thomson. 

When our genial toastmaster asked me two weeks ago if 
I would speak to the toast " Meritorious Achievements in Elec- 

1. An address delivered at the annual dinner of the American Institute 
of Electrical Engineers in New York city on February 24, 1910, on which 
occasion the parchment certificate constituting the official notice of the award 
of the Edison gold medal was presented to Dr. Elihu Thomson, of Swampscott, 
Mass. As an ardent admirer of Edison, Mr. Insull was much interested in 
the bestowal of the Edison medal on this and other occasions. He tells some- 
thing of the history of the medal in his speech. It may be added that Dr. 
Thomson was given the medal "For Meritorious Achievement in Electrical 
Engineering and Arts, as Exemplified in his Contributions Thereto during 
the Past Thirty Years." 

2. This was in 1904. 

123 



124 ADDRESSES OF SAMUEL INSULL 

trical Engineering," I began to delve into the past ages, and 
found myself carried back several centuries before the Christian 
era. I was preparing to occupy your attention for the whole 
evening, when he very kindly switched me off to deal with the 
subject of "Meritorious Achievements in Electricity," and 
intimated to me that I had better get through with it in about 
ten or fifteen minutes. So, instead of carrying you from a 
period five or six hundred years before the Christian era 
down to Sir Isaac Newton and the inventions of Benjamin 
Franklin and all the other brilliant lights who have contributed 
so much to the pioneer work in connection with our great 
profession, I found myself cut off from delving in the records 
of the past, and had presented to me the necessity of confining 
my remarks, in the few moments at my disposal, to what has 
really taken place in what we might call the present day. 

When we remember that the first telegraph was put in 
operation between Paddington in the West End of London, 
and Leyton, a small town in Middlesex, in what we Englishmen 
like to call the third year of the Victorian Era, and when we 
recall the fact that only a few years later the efforts made by 
Morse and Vail resulted in the establishment of a telegraphic 
line between Washington and Baltimore, 1 we must realize 
that the meritorious achievements in electrical engineering are 
practically modern-day affairs. 

The work in connection with the telegraph might well be 
called the first great achievement in electrical engineering. 
The path of electrical investigation and discovery has been 
followed by a long list of brilliant men. Unless, as I am re- 
minded by Professor Thomson, we recall the work of Benjamin 
Franklin in connection with lightning rods, the first real work 
was the establishment of the telegraphic system which has 
brought about such tremendous changes in the matter of inter- 
communication between all parts of the world. The overland 
systems of telegraphy were followed a comparatively few years 
later by the establishment of the under-sea communication. 

1. It was in 1844 that the historic message, "What hath God wrought," 
was sent over the wire. 



THE EDISON MEDAL 125 

I think the first cable of any consequence to be laid was one 
between Dover and Ostend, in the North Sea, and which I 
think was put in operation in the year 1850 or 1852. This 
effort was followed by the formation of the first cable company 
by Cyrus W. Field and Peter Cooper in this city of New York. 
It was not until 1866 that the efforts to connect Europe by 
cable with this vast continent were finally successful. 

The next great step in connection with electrical engineering 
was the invention of the telephone. I think it was in 1874 
that Alexander Graham Bell started his experiments which re- 
sulted in the exhibition of his telephone at the Philadelphia 
Centennial Exposition in the year 1876. The first telephone 
exchange was established in the city of New Haven, I believe, 
in 1878, and the first telephone exchange erected outside of the 
United States was installed by my friend Mr. Edward H. 
Johnson, in London, and I had the honor of operating it, in 
1879, for the first ten or fifteen minutes of its existence. 

The next step in the development of this marvelous art was 
probably the work in connection with series arc lighting. 
Jablochkoff, with his exhibition of his lamps on the Avenue 
de 1'Opera in Paris in 1878, and in London in the early part 
of 1879, and Brush, Thomson and Houston in this country, 
marked the next step forward in the development of our in- 
dustry. 1 

The work of these gentlemen was followed in the years 
1879 and 1880 by the introduction, experimentally, of the 
Edison incandescent lighting system. Mr. Edison's work in 
this direction was followed very rapidly by the alternating- 
current system produced by Zipernowsky, and by such men as 
Bradley, Tesla, Stanley, and numerous others, including our 
guest of this evening, in this country. In passing I may say 
that it is well to remember that the one name in this country 
that will probably stand out foremost in connection with the 

1. It may be noticed that in this brief sketch of electrical development 
there is no mention of the electric railway. This, Mr. Insull has declared since, 
was due to a trick of the memory. Not until he resumed his seat did he realize 
this oversight and the lack of mention of the work of Mr. Frank J. Sprague 
and others in relation to electric motors and the electric railway. 



126 ADDRESSES OF SAMUEL INSULL 

development of the alternating-current system, which has done 
so much to enable us to produce electrical energy on a large 
scale at low cost, is that of Mr. George Westinghouse, who has 
contributed so much else to the progress of the country. 

There are a great many other branches of the work that 
I might refer to the storage battery, the wireless telegraph, 
the work of Mr. Tesla in connection with alternating-current 
apparatus, the work of Lord Kelvin and Dr. Weston, in con- 
nection with instruments of precision, and the still later de- 
velopment of the turbo-generator, which has augmented to 
such a great extent the value of the alternating-current system. 
We might go on and speculate as to the possibilities of the 
future, as to whether some member of this Institute may at 
some future time receive this medal for brilliant achievement 
hi making a more direct cut to get at electrical energy, prob- 
ably obtaining it from some mineral or some electro-chemical 
process. But the time at my disposal has about expired, gentle- 
men, and all I am able to do is to conclude by thanking you 
for your close attention and by expressing the hope that all 
those who receive this medal in the future may deserve it as 
richly as the gentleman who is to receive it tonight. 



MASSING OF ENERGY PRODUCTION AN 
ECONOMIC NECESSITY 1 

COMING to the home of American manufacturing I feel 
some diffidence in addressing you on the subject of the 
possibilities of that manufacturing business in which we 
are all engaged. Low cost of production, the very best of 
product, eminence in selling all these have contributed to 
the conspicuous success of the New England manufacturers 
during the last fifty years. To attempt to advise you, brought 
up amid so many examples of economical manufacture, on the 
question of the possibilities of our manufacturing plant, seems 
to me somewhat of a dangerous experiment. What we central- 
station managers want always to bear in mind, above every- 
thing else, is that if we expect success in our business the first 
thing we have to do is to produce the kilowatt economically; 
the next thing is to learn how to sell it so as to bring the biggest 
possible return on the dollar invested in the plant for the pur- 
poses of manufacture. 

We are engaged in a business requiring very large capital 
in proportion to our annual turnover. The very best result 
that can be obtained from capital invested in central-station 
business is to turn that capital about once in five years; I 
think the average result is to get a return on that capital once 
in seven years. To put it another way, if you have an income 
of $50,000 a year, it takes, under the very best circumstances, 
a capital of not less than $250,000 to operate that business, 
or under average circumstances a capital of about $350,000. 

1. The General Electric Company gave a dinner on February 25, 1910, 
at the Brunswick Hotel, Boston, to the central-station representatives of New 
England. Mr. Insull was one of the speakers and made the address printed 
here. 

127 



128 ADDRESSES OF SAMUEL INSULL 

The manufacture of gas and the distribution of water are also 
characterized by the slow turning of capital. 

Take, for instance, our small customers. In this chart 1 
there is represented a block in a residence district of Chicago 
which has 193 apartments in it. We have in that block 189 
customers, and the number of lamps per customer is between 
ten and eleven. The kilowatt-hours used per year are 33,000. 
If you take the customers' separate maxima, amounting to 
68.5 kilowatts, you will find that the load factor is only 5.5 
per cent. All of you know full well that if your entire plant 
is only in use 5.5 per cent of the time it is only a question of 
time when you will be in the hands of a receiver. But if you 
take the maximum at the transformers you will find that the 
maxima of the various customers comes at such different times 
of the day that, instead of the load factor being 5.5 per cent, 
it is 19 per cent, representing a maximum of 20 kilowatts. 

IMPORTANCE OF THE DIVERSITY FACTOR 

That chart illustrates every branch of the electric-light 
and power business. The problem that all of you have before 
you is this question of increased load factor. If the possibilities 
of the central station are to go on enlarging in the way that 
most of us hope, you have got to get it by an improvement of 
load factor. That improvement of load factor is produced by 
an improvement in the diversity factor, or the obtaining of 
customers who make the maximum demand on you for your 
product at different hours of the day, or different days of the 
week, or different weeks of the month, or different months 
of the year. Whether you are engaged in distributing, say, 
5,000,000 kilowatt-hours a year, or whether you are engaged 
in distributing 500,000,000 kilowatt-hours a year, the under- 
lying principles are precisely the same. 

1. The map diagram to which reference is here made is one which Mr. 
Insull used in several of his addresses. It will be found in the present work as 
Fig. 1 of the chapter on "Centralization of Energy Supply," page 448. The 
accompanying data have been changed somewhat with the passage of time, 
but the diagram itself is identical in all cases where it was used. 






MASSING OF PRODUCTION 129 

I have attended many meetings of various electrical associa- 
tions, and almost invariably the complaint of the representa- 
tives of the smaller central-station companies is that nearly 
all the speeches delivered and nearly all the papers read have 
reference to the conditions that exist in large cities. But let 
me tell you, gentlemen, that when those who represent small 
companies make that assertion they are failing in a recognition 
of the underlying principles that govern their business. These 
principles are the same in a town, say, of 10,000 people, as in 
a city of 500,000, or 1,000,000, or 2,000,000 people. 

I have in mind a plant whose total output is 5,000,000 
kilowatt-hours a year. The owners operate their business on 
a load factor of about 60 per cent. How do they obtain that 
figure? They have first the ordinary electric-light-and-power 
business. They have a few large manufacturing establish- 
ments to which they sell electricity at low prices. To this they 
add the street-railway business of the community in which they 
live, a town of 25,000 people. They supply the energy for a 
couple of interurban railways that come into that town, and 
they pump the water that supplies the city supply to the 
inhabitants of the town. I have in mind another town, of 
50,000 people, where the amount of electrical energy sold is 
only about the same as that sold in the town of 25,000 people. 
In the second example the business is operated necessarily 
at a much inferior load factor, because the company confines 
its efforts merely to the light-and-power business. Instead 
of its plant being in action for, say, 50 per cent of the time, 
earning money to meet fixed charges and to satisfy the stock- 
holders, this second company takes the position that it cannot 
afford to quote low rates, whereas as a matter of fact the rates 
that are quoted in the smaller town give a much greater share 
of profit. Not only that, but the securities of the first com- 
pany are on a much better basis than those of the second. 
Furthermore, there is much greater satisfaction to the stock- 
holders, for whom we all have to work. If you will just bear 
the result of that one block of apartments in the North Di- 
vision of the city of Chicago in mind, and remember that the 



130 ADDRESSES OF SAMUEL INSULL 

diversity of the demand raises the 5.5 per cent load factor to a 
19 per cent load factor; if you will take that one example home 
with you, you will have the secret of changing your business 
from a comparatively small business, one which hardly pays a 
return on the investment, to a business that will give you a 
very handsome return and make your securities as good as those 
of any of the larger companies. 

GETTING INTO A LARGER WAY OF BUSINESS 

In starting to develop the possibilities of the central-station 
business in Chicago we had to contend with many difficulties. 
We live in a community where the purchasing power of the 
people does not average particularly high; where there are 
still considerable stretches of territory within the city limits 
that are given over to gardening or truck-farming. We have 
to cover a territory, including the suburban towns surrounding 
us, of about 2,500 square miles a territory twice the size of 
Rhode Island. In many parts of this area the manufacturing 
business is limited. Moreover, in the manufacturing districts 
the establishments are, as a rule, very large as compared with 
the average manufacturing establishment supplied by central- 
station companies. 

The perfection of the alternating-current system, followed 
by the marvelous development of the steam turbine, gave 
us great possibilities of low cost of production of electricity if 
we could find the customers to take it off our hands. We were 
compelled, in order to develop a large business, to quote low 
prices, not only to the large consumer but to the small house- 
holder. The man who only pays us a little over $18 a year, 
and buys energy from us on the basis of his own personal load 
factor of 5.5 per cent, is able to buy our product at about 10 
cents a kilowatt-hour. If his load factor improves compara- 
tively little, he can buy electricity from us at a relatively lower 
price, according to what his load factor may be. 

With the development of the steam turbine we decided to 
try and get in a larger way of business. We thought that by 



MASSING OF PRODUCTION 



131 



possibly getting the street-railway business, or some of the 
street-railway business, and some of the elevated-railway busi- 
ness, the combination of these demands with our own would 
improve our load factor, partly as the result of the diversity- 
factor improvement and partly owing to the fact that urban 
railways have two peaks a day instead of one, and consequently 
their load factor would necessarily be better than ours. The 
results we have obtained so far in that direction are shown in 
Fig. 1. Our maximum load last winter was 158,000 kilowatts, 



180,000 
160,000 
140.000 
120,000 
100,000 
80,000 
60,000 
40,000 
20,000 



J 
ft 


















A 


, 


2.C 






180,000 
160,000 
140,000 
120,000 
100JXX) 
80,000 
60,000 
40,000 
20,000 



'. 




CHICAGO 
DIVERSITY FACTOR 
1909-1910 


















''A 












/ 


\ 






r 






/ 


\ 


fa* 




J 




\ 





I 8 


< 




E 




^ 


\f 


20 J4 


~& 


V18I 


S 


I 






// 


\ 






L 


"f\ 


^ 




V 


\ 




i 




^ 


^y 




^O 


V 


\ 


\v 




J-M?- 






V 










V^j 


s ^ 


^a-r 


J& 




















224.68101224.6 
1. A.M. P.M. 

Fig. 1 


8 10 1 

J 



as shown. The maximum demand of the street-railway busi- 
ness shows separately a diversity of a little over 20 per cent. 
The maximum demand of the various departments of our own 
business shows a diversity of a little over 5 per cent. But 
when those are put together we show this winter so far a diver- 
sity factor of 12.8 per cent. The winter is not yet over, and 
since I left home they have had more cold weather 1 in Chicago. 
The chances are that before the winter is passed, by a combina- 
tion of the street-railway business, elevated-railway business 



1. Cold weather increases the street-railway load, additional energy being 
required both for traction and for heating cars. 



132 ADDRESSES OF SAMUEL INSTILL 

and our own business, we will have a diversity factor of about 
20 per cent. 

What does that mean? That means that we are able to 
supply ourselves and the railways with which we have contracts 
with their maximum demand for energy with 20 per cent less 
plant than the electric-light-and-power business and the railway 
business separately could supply themselves. I suppose it is 
a fair estimate to take the cost per kilowatt of central-station 
investment as somewhere near $100 a kilowatt. The saving for 
this particular winter, on the figures as I make them, amounts 
to somewhere about $3,500,000 in investment. 

LOOKING FORWARD TO THE ENTIRE ENERGY BUSINESS 
OF THE CITY 

We carry that still further. We have tried to estimate the 
amount of business that we would obtain if we did the entire 
business of the city of Chicago. At the present time we 
figure that we are getting somewhere in the neighborhood of 
30 per cent of the possible business offering in the city of Chicago. 
I do not mean 30 per cent of the business that we hope to get 
in the future as the result of the growth of the city of Chicago; 
I mean about 30 per cent of the business that is now there. We 
have generally the reputation of being keen after business; 
but if our estimates are correct the business that we now have 
is represented, so far as the light-and-power business is concerned, 
by the shaded portion of the lower left-hand square of Fig. 2. 
The unshaded portion of that square represents the business 
that it is possible for us to obtain. In arriving at the con- 
clusion as to the business that we can obtain we don't simply 
include ordinary isolated plants; we include every industrial 
steam plant that is operated in Chicago. We take the ground 
that there is no reason for the existence of those plants if we 
can offer our product at a price that will yield us a profit in 
competition with the plants of the private owner. I don't 
at all mean what you ordinarily talk of as electric-light-and- 
power business. Of course the isolated plants that are still 



MASSING OF PRODUCTION 



133 



running independently are included in this; but I mean all the 
large and small manufacturing companies that operate their 
own energy service. 

Referring again to Fig. 2, the shaded portion of the middle 
square on the left represents the street-railway and elevated- 
railway business which we now have. The unshaded portion 
of the same square represents that portion of this class of busi- 
ness which we hope to get. 

The subject of the electrification of steam railroads is one 

960,000 



300,000 



540.000 



180,000 



320,000 



160,000 



Fig. 2. Possibilities of Chicago Electric Service in 1909 

very much discussed at the present time, and we have tried to 
arrive at a conclusion as to the amount of energy that would be 
consumed by the steam railroads centering in Chicago in the 
event of their electrifying their terminal properties. By 
"terminal properties" I mean the switching yards, etc., within 
the city, and a reasonable length of track outside of the city. 
In order to arrive at a basis of the possible business offering in 
that direction and the relation of the maximum load of that 
business to our load conditions we have taken the earnings of 
the railroads and assumed that the maximum load would come 
at a time of the year when they earn the most money. Based 
on that information, we estimate that there is the amount of 



800,000 
640.000 
480,000 
320,000 
160,000 



[THIS DIFFERENCE I33.OOO K.W. 
PERCENT OF COMBINED MAXIMA 20 4O 
AT 335-% RESERVE: TO STATION CAPACITY 177.300 K.W. 
177.300 K.W. AT $9O PER K.W- $I6,887,OOO 


NON-COINCIDENT MAXIMA | 
LOAD FACTOR 34.2"/a 






CO 
& 


STEAM RAILROADS 
LOAD FACTOR 
33.3% 


TJ 

I COMBINED MAXIMA 
I LOAD FACTOR 43. \/o j 




STEAM RAILROADS 


| 




' 








STREET RAILWAVS 






LIGHT AND POWER 
LOAD FACTOR 
30.7 % 


LIGHT AND POWER 






134 ADDRESSES OF SAMUEL INSULL 

steam-railroad electricity business offering in and around the 
city of Chicago which is indicated by the topmost square at the 
left in Fig. 2. 

How A GREAT SAVING CAN BE EFFECTED 

In the left-hand set of squares in Fig. 2 we have placed the 
maximum of each business irrespective of when that maximum 
comes, and the result shows a little over 34 per cent load 
factor. To the right of that we have put the coincident 
maxima; that is, the maximum of the electric-light-and-power 
business occurring at the same time as the demand from the 
street railways and the demand from the steam railroads. I 
think probably, so that you will understand that better, it 
would be well for me to say that in our experience in figuring 
the possible steam-railroad load the maximum comes in the 
month of October. Every man here knows that the maximum 
of his electric-light-and-power business does not come in the 
month of October, so that the plant that would be supplying 
the steam railroads with their maximum in the month of 
October would be available to supply the maximum for the 
light-and-power business coming in December and the maxi- 
mum for the street-railway business coming, in our part of the 
country, a little later, say in January. The result is that with 
an actual demand on us which would indicate a load factor 
of 34 per cent, if you figure it on the basis of the non-coincident 
maxima, which is the true basis, you attain a load factor of 
43 per cent. 

Now, what is the difference between the two? Not ten per 
cent, gentlemen; but it means that your plant would be in use 
almost one-third more time than if the maximum loads of those 
various lines of business all came at the same time. To do 
this entire business, based upon all the maxima non-coincident, 
would require in the city of Chicago an installation of 655,000 
kilowatts (see Fig. 2); that is, a central-station installation of 
655,000 kilowatts, or practically, as we talk horse-power, about 
900,000 horse-power. On the basis of when the maxima are 
actually needed the amount of plant you have to provide to 



MASSING OF PRODUCTION 135 

take care of the whole of that great business would be rated at 
522,000 kilowatts, or a difference of 133,000 kilowatts. If in 
addition to the cost of the central-station installation you add 
the cost of conduits and cables, which can largely be used in 
common for all the different classes of business, you arrive at 
the great saving of nearly $20,000,000, resulting from placing 
the generation and distribution of the energy required in a 
community of 2,500,000 people in the hands of one power com- 
pany. 

COMBINATIONS MAY SPELL ECONOMY 

Within the last week or so the vice-president of the New 
York, New Haven and Hartford Railroad, appearing before 
one of your official bodies in Massachusetts, said that in his 
opinion within the next fifteen years the New Haven road be- 
tween New York and Boston would be electrified throughout, 
and that the towns on the way would have the opportunity to 
obtain electricity at a very low cost a cost dependent upon 
the cost to the railroad company which would necessarily be 
low, in his opinion, because of the very large amount of business 
that it would have of its own. My judgment is, gentlemen, that 
as central-station managers we must place ourselves in a 
position to do all classes of business. We must forget that we 
were originally started to supply an ordinary light-and-power 
business, mainly light. We must do what the gas companies 
have done. They have had to forget that they were formed 
originally as illuminating companies, and most of them today 
get a very large share, the preponderating share, of their in- 
come from other sources, mainly heating and cooking. What 
we have to realize is that it is our business to produce and dis- 
tribute all of the energy required in the communities in which 
we do business. If the communities in which we do business 
are so small that we cannot get a low basis of production because 
we only manufacture on a retail basis, we must face the in- 
evitable and remember that all business is the survival of the 
fittest. We will do well in that case to combine with those 
immediately around us; and if that combination is not large 



136 ADDRESSES OF SAMUEL INSULL 

enough to produce energy on an economical basis we may find 
it wise to go farther afield for our combinations. 

ENLARGING THE FIELD OF THE CENTRAL STATION 

One of the first authorities in the world, in my opinion, 
on this subject of the possibility of the central station, is Mr. 
Coffin's friend, Dr. Emil Rathenau, the head of the great Gen- 
eral (Allgemeine) Electricity Company of Berlin. A few years 
ago, before the possibility of low cost of production was brought 
about by the development of the turbo-generator, or rather 
just at the time when it seemed to be in sight, I was calling on 
Dr. Rathenau, and I asked him what he thought was the next 
step in the development of the central station. I had started 
at that time to build large stations. I started out in Chicago 
with the intention of having a station of 70,000 kilowatts, and 
owing to the remarkable engineering skill exhibited by Mr. 
Rice 1 and his staff that station, which I had expected would have 
a rating of 70,000 kilowatts, by the time it was finished, with 
the same building, the same number of boilers, the same grate 
surface, the same stack capacity, practically the same amount of 
money invested, had a rating capacity of 120,000 kilowatts. 
Dr. Rathenau did not quite agree with me on the question of 
the size of central stations; and I pointed out to him that my 
conditions were very different to those existing in most of the 
German cities, and that the possibilities of energy distribution 
in this country far exceeded those in Germany for a given 
amount of territory. But the thing that he did tell me, and 
the thing that started me thinking and led to my enlarging my 
field of operations around Chicago to a point where, as I say, 
we cover, not in one company but in three companies that work 
together and buy energy from one another, 2 a territory of 

1. Mr. E. W. Rice, Jr., now (1915) president of the General Electric 
Company, of Schenectady, N. Y. 

2. Referring, no doubt, to the Commonwealth Edison Company, of 
Chicago, the North Shore Electric Company, supplying suburban areas sur- 
rounding Chicago, and the Economy Light and Power Company, of Joliet, 111. 
The North Shore and Economy companies were merged into the Public Service 
Company of Northern Illinois in 1911. 



MASSING OF PRODUCTION 137 

2,500 square miles the statement of Dr. Rathenau was that 
he thought before he was through with the electrical business 
it would be possible that around the large centers of population 
one central-station organization would cover a radius of fifty 
miles. If we are to hold our business, and if we are to take 
advantage of the opportunities that are bound to offer in the 
next few years in supplying electricity to such large producers 
as the steam railroads if that is your goal, gentlemen, you 
should get together; you must do away with small, uneconom- 
ical stations; you ought to get some such results as are shown 
on this chart. 1 

How MR. COFFIN AND MR. INSULL DECIDED ON A 5,000- 
KILOWATT TURBINE UNIT 

This chart represents the increase in total kilowatt-hours 
generated by the Commonwealth Edison Company over a 
period of ten years. Ten years ago we produced about 35,000,- 
000 kilowatt-hours. In 1909 we produced 490,000,000 kilo- 
watt-hours, showing as a rate of increase a doubling up of our 
business, say, every two and a half to three years. Now take 
some of the advantages that we obtained in getting that out- 
put. The first advantage we had was that we were able to call 
on the General Electric Company to design for us very large 
steam turbines. Our ordinary electric-light-and-power business 
would not have warranted us in asking the General Electric 
Company to make for us 5,000-kilowatt turbines. I remember 
in the early days of the experiments with Curtis turbines Mr. 
Coffin 2 asked me if I would oblige him by trying a Curtis tur- 
bine. I had already purchased reciprocating-engine units 
that ran up to about 5,000 horse-power. I think the General 
Electric Company had an experimental Curtis turbine at that 
time of some 250 or 500 kilowatts, and Mr. Coffin asked me to 

1. This diagram is another of those used on several occasions by the 
speaker. In this collection it appears (brought down to the close of 1913) 
as Fig. 20 of the paper on "Centralization of Energy Supply," page 469. 

2. Mr. C. A. Coffin, then president, now (1915) chairman of the board, 
of the General Electric Company. 



138 ADDRESSES OF SAMUEL INSULL 

try a 1,000-kilowatt turbine. I told him it was not any use at 
all; that we had passed away beyond that; that the ordinary 
requirements of our electriolight-and-power business demanded 
5,000-kilowatt units. I think that the development that we 
have had in the last ten years, or especially in the last six years, 
is owing very largely to the courage displayed by the General 
Electric Company in jumping from a little experimental machine 
of 250 or 500 kilowatts and being willing to take the risk of 
manufacturing, if we were willing to take the risk of installing, 
steam turbines of not less than 5,000 kilowatts. 

Just see the results that we have obtained from the use of 
the turbine. Here are "tons of coal burned." 1 From 1901 to 
1904 the tons of coal burned show just about the same rate of 
increase as the kilowatt-hours manufactured, but between 
1904 and 1905, when we began to get the use of our turbines, 
the lines crossed, and the difference between the kilowatt-hours 
generated and the tons of coal burned widened right along. Or, 
putting it another way, the pounds of coal per kilowatt-hour 
produced went down constantly, as shown in the diagram. 
While that result was mainly owing to the remarkably high 
efficiency of the turbo-generator unit, it is also owing to the 
improvement in load-factor conditions. The addition to our 
business of large wholesale customers, such as street railways 
and elevated railroads, has resulted in our being able to use our 
manufacturing plant 33.33 per cent more than we were able to 
use it before we went into that line of business, and there is 
no doubt that part of the reduction in the pounds of coal per 
kilowatt-hour produced comes from that improved load factor. 

BENEFITS FOR THE SMALL CUSTOMER ALSO 

The larger volume of business introduces better conditions 
of operating from month to month. The lowest load factor 
at which we have to operate our stations is in the month of 
November 2 and is 43 or 44. Such a condition of operation, 

1. Referring to Fig. 20 on page 469. 

2. See Fig. 3 of chapter on "The Larger Aspects of Making and Selling 
Electrical Energy," page 82. 



MASSING OF PRODUCTION 139 

being able to operate our plant at practically 44 per cent of 
the time for a whole month, affects not only the cost of our 
total fuel used, but it affects our labor costs, our repair costs, 
and every item, including our interest and depreciation costs, 
that goes to make up the total cost of energy at the switch- 
board. The result is that we have seen our way to a rapid 
reduction of rates, not only to our small consumers, but also it 
has enabled us to introduce very much more liberal rates with 
relation to wholesaling electricity to very large industrial 
establishments . 

We have gained experience in producing large volumes of 
energy, necessarily at low prices, because in order to meet the 
element of competition, that is, the competition with the rail- 
way company in producing for itself, we have had to qupte low 
prices. But the mere fact that our business is conducted on 
a small margin has taught us to study questions of cost of 
production, and I am confident that one of the reasons for the 
fact that we are able' to produce electricity cheaper than any- 
one else on either side of the Atlantic who has to buy coal is 
owing to the fact that the apparent margin of profit between 
cost and selling price on upwards of half of our business is so 
small that we have ever before us the necessity of low cost of 
production, highly efficient plants, the best kind of upkeep, 
and the obtaining of our money at the lowest possible price in 
the markets of the world. Naturally, we are able to meet 
the last requirement owing to the large volume of business 
with which we have to deal. 

Now I want to direct your attention to the following 
table. It gives a comparison of customers in the residence 
section of Chicago in October, 1908, and October, 1909. In 
October, 1908, we had 25,900 flats, and in the same month in 
1909 we had 37,940; we had 5,232 houses the first year and 
6,765 the second year, and we had 3,559 small stores the first 
year and 4,842 the second year. The income we obtained 
in 1908 was $41,000 from flats, and $62,000 in 1909; $15,000 
from houses in October, 1908, and $20,000 from houses in 
1909. In small stores the comparison was $15,000 and 



140 ADDRESSES OF SAMUEL INSTILL 

RESIDENCE SECTIONS OF CHICAGO 





Flats 


Houses 


Small 
Stores 


Number of Customers in 
October, 1908 


25,900 


5,232 


3,559 


October, 1909 


37,940 


6,755 


4,842 


Income in 
October, 1908 


$41,323 


$15,768 


$15,598 


October, 1909 
Average Income per Customer 
in 
October, 1908 


62,209 
$1.59 


20,869 
$3.02 


20,885 
$4.38 


October, 1909 


1.64 


3.08 


4.32 



000. Now take the average income per customer. In 1908 it 
was $1.59 in the flats and in 1909 $1.64; in the houses it was 
$3.02 in the former year and $3.08 in the latter year, and in 
the small stores $4.38 the first year and $4.32 the second year. 
Between those two periods there was a slight reduction of 
price; that is, of list price. 



"Is THE FAULT WITH You OR WITH YOUR COMMUNITY?" 

Why is it that with reducing prices we get an increasing 
income in two cases, as shown, and a reducing income in the 
other case? The reason the income was reduced in small stores 
was owing to the fact that there electricity is used for lighting. 
The increase in income in the flats and houses is simply the 
result of advertising, canvassing, educational work of all kinds. 
Our experience is that the lower we set the price per unit of 
energy, if we will get at our customers and educate them to 
the uses of electricity, the greater is that use, within certain 
limitations. It follows that our bills, and consequently our 
profits, are greater. 

Almost as important as low cost of production, as massing 
of production, is the question of selling. You have a notable 
example of the expenditure of money in the matter of selling 
right here in New England. I don't know of any more pro- 
gressive company in that respect than the company presided 



MASSING OF PRODUCTION 141 

over by my friend Mr. Edgar, 1 and if you expect to sell kilowatt- 
hours, if you expect your customers to use those kilowatt-hours 
at other times than the peak, you must educate them how to 
do it, and you cannot educate them how to do it unless you 
spend money. The best possible return that you can get on 
any expenditures that you may make is the return that you 
will get on money expended in exploiting your business and 
endeavoring to add to your number of customers, we will say. 
But still more important is the effort to get the customers 
that you have to use your product throughout as much of the 
twenty-four hours as possible. The field is almost limitless in 
this direction. If you will provide low cost of production and 
low selling prices, so as to enable your customers to use the 
thousand and one devices that consume electricity at times 
other than the time that brings your maximum load, you will, 
I am sure, make your properties of far greater value. You 
will, too, become far more popular with the community, be- 
cause the man who can constantly reduce his price must of 
necessity become more popular in the community. Moreover, 
you will sell a far greater number of kilowatt-hours per capita 
than you are doing at the present time. I don't want to be 
personal, and would not think of drawing attention to any 
individual case, or the case of any one company; but go over 
the records that are published by your own state commission; 
study the question of the kilowatt-hours sold per capita when 
you get home; and if you happen to be the low fellow find out 
whether the fault is with you or whether the fault is with your 
community. 

The average purchasing power of the people living in the 
New England states is large. On the variation in the electrical 
energy they use per capita I won't take the lowest amounts, 
because they seem so absurd; but the figures vary in towns of 
reasonable size from 20 kilowatt-hours sold per capita per year 
to 74. If I were interested in a New England property, or if 
I were running it myself and I found that I could only reach the 

1. Mr. Charles L. Edgar, president of the Edison Electric Illuminating 
Company of Boston. 



142 ADDRESSES OF SAMUEL INSULL 

low number of kilowatt-hours sold per capita, I would think 
that somebody else should take my job, because I would know 
that such a condition must finally very seriously affect the 
investment for which I was responsible. The situation must 
of necessity compel high rates for energy. High rates for 
energy may exist in isolated cases today, but they cannot exist 
permanently in this part of the country, any more than they 
can in any other part of the country, when you have before you 
the example day after day of the price at which it is possible 
to manufacture and sell electricity at a profit right in this city 
of Boston. 

SUPPLY THE NEED OF THE LARGE USERS, OR THEY MAY 
SUPPLY YOURS 

Before I sit down I want again to emphasize, above every- 
thing else, the importance of working in the direction of being 
the sole producer of electrical energy in a given community. 
I don't know that it will come in our time, although it looks 
very much like it, but if the steam railroads should go to 
electricity as a motive power there is no question that they 
will become great factors in the production and distribution of 
electrical energy, certainly in the thickly settled portions of 
the United States. We have right within ourselves the ability 
to get that business. It is not such an easy matter for the 
steam railroads to finance their development; they don't find 
it so easy to borrow large sums of money; and if they can be 
relieved of the investment cost for providing the plant necessary 
to produce electricity I should think that they would welcome 
that relief, just the same as they welcome relief from having 
to provide the capital to run sleeping cars, or to build locomo- 
tives or passenger cars or freight cars. The natural thing for 
us to do is to be the producers of energy; and I don't know of 
any better part of the country, any more favorable part of the 
country to pick out than the states along this portion of the 
Atlantic seaboard. You have large centers of population 
within every fifty or seventy-five miles. You have existing in 
those centers of population large central-station plants. My 



MASSING OF PRODUCTION 143 

own belief is that in the future those central-station plants 
will either supply the large users of electricity with their energy 
or else those large users will be supplying the central-station 
companies, in the territory in which they operate, with elec- 
tricity and the central-station companies will become simply 
distributing companies. 

I think before closing I will give you some figures bearing 
on this subject from the situation existing around New York, 
where the first effort at electrification of steam terminals has 
taken place. The New York Edison Company's load factor 
is about 28.9 per cent. The New York Central Railroad 
Company's load factor is about 33.7 per cent. The Inter- 
borough Rapid Transit Company's load factor is about 39.5 
per cent. If you put them all together the load factor of 
all those businesses together is somewhere between 42 and 
45 per cent. Any one of them separately would only be able 
to use its plant practically from 30 to 33 per cent of the time. 
If they were combined and bought their energy from one central 
generating company, the plant of that generating company 
would be earning money practically 50 per cent more of the 
time than if those plants were run separately. If I understand 
my business correctly, massing of production for all purposes 
is an economic necessity; and there is no more reason for build- 
ing separate plants for different classes of business in the city 
of Boston or the city of New York than there is for building 
them in the city of Chicago, where the results have been 
mutually satisfactory both to the company which I operate 
and to the surface and elevated roads that pay us $2,500,000 
a year for supplying them with electrical energy. 



TWENTY-FIVE YEARS OF CENTRAL- 
STATION COMMERCIAL DEVELOPMENT 1 

IT IS an especial honor, which I very much appreciate, to be 
given the opportunity of addressing you on so notable an 
occasion as the celebration of the twenty-fifth anniversary 
of the starting of this association. To those of us who have 
been in the central-station business since its inception it hardly 
seems possible that twenty-five years have passed since the 
organization of the association in Chicago on February 3, 1885. 
If, however, we reflect on what has been accomplished in that 
time and recall that at our first meeting our membership was 
only 71, whereas, if I am correctly informed, it is at the present 
time 5,369, we would seem to have occupied about the allotted 
time in our growth from birth to that of a young but sturdy 
manhood. 

The organization was projected originally more in the 
interests of the electrical manufacturers than in the interests 
of the central-station companies. The change during the first 
few years was gradual, but for the last twenty years the National 
Electric Light Association membership has been composed of 
the companies engaged in the central-station business of the 
country. Within a comparatively few years still further 
modifications in our membership have taken place, and today, 
besides having direct membership of the central-station com- 
panies and the officials connected with them, we have state 
organizations affiliated with us as well as company sections 
composed of company employees. I know of one company 
section in one of the large centers of population having a 

1. An address delivered on May 25, 1910, at the St. Louis convention of 
the National Electric Light Association. This paper was written in advance 
and read from manuscript. 

144 



COMMERCIAL DEVELOPMENT 145 

membership of upwards of 400, representing about fifteen per 
cent of the total central-station employees of that particular 
community. 

THANKS DUE TO THE ELECTRICAL MANUFACTURERS 

In 1885 when the National Electric Light Association was 
formed, the development of the central-station business was 
confined almost entirely to a few companies established under 
the auspices of the Edison Electric Light Company. The 
companies forming our early membership were not engaged in 
what we understand today as central-station business but 
were either arc-light manufacturers and supply men or those 
companies that were engaged in series arc lighting, doing prac- 
tically no other business, except that, in a very few cases, a 
small amount of power and series incandescent business was 
transacted. 

If you will look over the list of the people who attended the 
first meeting to organize the National Electric Light Associa- 
tion, you will not fail to be impressed by the lack of central- 
station men on the committee of arrangements, or on the com- 
mittee of invitation, or on any of the other committees forming 
part of the original organization. Our thanks for the estab- 
lishment of this association, which in later years has wielded 
such a remarkable influence and has been of such wonderful 
assistance in the development of the central-station business, 
are really due to the electrical manufacturers and electrical 
supply people whose business was to sell series arc-light plants 
for city lighting and who, at the time they started our associa- 
tion, had little or no conception of the development of the 
central-station business as we now understand it. 

How THE BUSINESS WAS DEVELOPED 

The strides made in the commercial development of the 
central-station business have been so rapid that we hardly 
realize how short a time ago many of us were doubtful as to the 
ultimate outcome of the business in which our members are 
engaged. 



146 ADDRESSES OF SAMUEL INSULL 

At the Niagara Falls meeting, in 1897, I well remember the 
paper read by my friend Mr. T. Commerford Martin, 1 on the 
"Daylight Work of Central Stations." He started his paper 
by stating that the central-station industry had in some re- 
spects been a disappointment; that after nearly twenty years 
of work the companies restricted themselves injuriously, by 
remaining mere lighting companies, and he asked the question 
what would become of the central-station companies if a new 
lighting medium came into vogue and we were deprived of our 
illuminating business entirely. 

To get statistics of the early days of the business is a dif- 
ficult matter, but Mr. Martin on the same occasion showed that 
in 1886 there were 410 central stations in the country; that only 
300 of these furnished any statistics and that of those 300, 226 
were only doing a night business. 

Assuming, as Mr. Martin did, that those who did not re- 
port were in the same class as the 226 doing only a night busi- 
ness, we find that out of 410 so-called central-station companies 
325 were doing business only between dusk and daylight. 

From these figures I should judge that at the time of the 
starting of the National Electric Light Association in 1885, 
there were not more than eighty companies engaged in serious 
central-station business, that is, in selling electrical -energy for 
all kinds of purposes every hour of the twenty-four, whereas 
today there are probably upwards of 6,000 central-station 
companies in the United States. It is probable that to say 
$10,000,000 represented the cash investment in the business 
in 1885 is naming a very liberal amount, whereas it is authorita- 
tively stated that between $1,000,000,000 and $1,250,000,000 
represents the total sum of the capital employed today in the 
central-station industry of this country. 

EARLY CENTRAL-STATION ENTERPRISES 

The first commercial central-station plant erected anywhere 
was that installed by the Edison Electric Illuminating Company 

1. For many years one of the editors of the Electrical World. In 1909 
Mr. Martin became secretary of the National Electric Light Association. 



COMMERCIAL DEVELOPMENT 147 

of New York. It served a territory about a mile square, ex- 
tending as far south as Wall Street. The station was located on 
Pearl Street one or two doors south of Fulton Street. The 
system employed was the Edison two-wire main-and-feeder 
system. It was put into operation September 4, 1882. Some 
time after the construction of the New York plant was begun, 
a small central-station plant, of only 250 16-candlepower in- 
candescent lamps, driven by water power, was projected at 
Appleton, Wisconsin. The Appleton plant was started on 
August 20, 1882, just two weeks before the New York station 
was put into operation; so that, judging by the date on which 
the first commercial plant was put in operation, while New York 
can lay claim to the credit of projecting the first central-station 
system, Appleton, Wisconsin, in the heart of the Central West, 
seems entitled to the credit of putting into operation the first 
commercial central station and to have been the pioneer in a 
business which in less than three decades has grown from noth- 
ing to an investment in this country alone which can only be 
expressed in ten figures. 

The commercial development of the business was of neces- 
sity, in the early days, hampered, among other things, not only 
by a lack of knowledge of conditions governing the relation of 
the true methods of selling electrical energy to the cost of pro- 
ducing it, but also by the high capital cost of the plant used. 
However, it might be well to state that the first million dollars 
invested in the central-station business was that provided by 
the local Edison company of New York, whose plant was put in 
service in September, 1882; and this first capital showed sub- 
stantial earning capacity, and I believe paid dividends before 
additional capital was raised by the company. 

But what could be done under the favorable conditions 
existing in New York could not be done elsewhere, and the 
commercial development had to await the efforts of the in- 
ventors in the direction of reducing first cost. It is not my 
purpose tonight to detail the marvelously successful work 
of the many brilliant inventors whose efforts, following Edison's 
original invention of the central-station system, have contrib- 



148 ADDRESSES OF SAMUEL INSULL 

uted so much to the success of our business. I shall but men- 
tion what occurs to me as the leading features which from the 
technical and engineering side have made the central-station 
business of today possible. 

The change from the two-wire system to the three-wire 
system, saving 66.66 per cent of the copper necessary in dis- 
tribution, and the reduction in the energy consumed by the 
incandescent lamp from 6.5 watts per candle in 1882 to 3.1 
watts per candle in 1890, made the central-station business a 
certain financial success in cities of the first, second and third 
rank. The introduction of the alternating-current system, 
first established in this country at Greensburg, Pa., in 1886, 
by the Westinghouse Company, made the central-station 
business available for the small towns throughout the country. 
The building in 1890-1891 of slow-speed electric generators 
directly connected to highly economical reciprocating en- 
gines, usually of the vertical type, was the first step in the 
direction of reducing first cost of central-station investment, and 
also in reducing the operating cost of the energy produced. 
This made possible, and was followed in 1896, by the introduc- 
tion into this country of the use of high-tension alternating 
transmission lines operating substations, in which were in- 
stalled rotary or stationary transformers, depending on whether 
direct or alternating current was to be distributed therefrom. 

MASSING OF PRODUCTION 

The combination of the direct -connected dynamo-engine 
unit of high efficiency, the high-tension transmission lines and 
substations, forced, on account of the saving made, the abandon- 
ment of small generating stations and the massing of production 
on a very large scale. The limit of the size of units of power was 
reached by reciprocating engines at about 5,000 horse-power. 
A demand sprang up as the volume of energy produced increased, 
partly from centralizing production and partly from in- 
creased business, for prime movers of greater size, lower in- 
vestment cost and lower operating cost; resulting in the de- 



COMMERCIAL DEVELOPMENT 149 

velopment of very large steam turbo-generators, which operate 
today in units of upwards of 20,000 horse-power, and which 
will within the next year be operating in units of 30,000 horse- 
power. Within the last two years the introduction of higher 
efficiency incandescent lamps such as the tungsten lamp 
has greatly reduced the cost of light. 

I have tried in the foregoing to picture to you in as few 
words as possible, the technical, or rather the engineering, 
development of the central-station business during the last 
quarter of a century. How far the commercial development 
of the business has been forced by the work of the engineers, 
or how far the necessities of the salesmen and the business 
managers forced the technical development, it is difficult to 
say; but the fact remains that as the possibilities of economical 
investment and economical production have increased, the 
business obtained and the energy distributed have increased 
by leaps and bounds, so that it is no uncommon occurrence 
for a central-station company to double its output every three 
to four years. 

THE QUESTION OF RATES 

In the early days of the development of the central-station 
business, say for the first ten years of its existence, from 1881 
to 1891, the customers of the central-station companies looked 
upon our product as more or less of a luxury. Partly owing 
to a lack of knowledge of the conditions governing the relation 
of cost and selling price, and partly owing to the difficulty of 
getting our customers to make the necessary investment to 
connect with our system, our service was used rather as a luxury 
or an advertising proposition than as a necessity. In the early 
days of the business rates were very high, corresponding to gas 
at about two dollars per thousand feet. The discounts from 
these rates were very small, and most large consumers of elec- 
trical energy, even within the area served by a central-station 
system, found it to their advantage to install their own plants 
and manufacture their own electrical energy. The result to the 
central-station company was that the central-station business 



150 ADDRESSES OF SAMUEL INSULL 

was confined almost entirely to short-hour consumers, the con- 
sequence being that the investment of the central-station 
company was in use but a very few hours out of the twenty- 
four, the interest cost to the company being necessarily very 
high and the operating cost correspondingly high. It was not 
until the early nineties that some of the managers of the large 
central-station properties of the country appreciated the fact 
that if they desired to place their business on the basis of a 
general public necessity it was necessary for them to rearrange 
their rates on such a plan as would give the long-time consumer, 
the man who used the central-station company's investment 
most steadily during the year, the lowest possible price; and 
the recognition of the necessity of meeting this condition may 
possibly have had as much to do with reducing operating costs 
and reducing interest and depreciation costs as have the wonder- 
ful work of the inventors and the marvelous skill of the en- 
gineers. 

PROPER METHODS OF SELLING 

It would have been of very little use to the central-station 
manager to have been able to take advantage of the large units 
produced by the manufacturers for the production of energy or 
of the economies introduced in the distribution systems by the 
introduction of high-potential alternating currents and trans- 
former substations, if the methods of charging for service had 
not broken away from the plan on which the business was 
originally started. If you will take the statistics of any of the 
central-station companies, whether they be large or small, and 
look for the reasons for the enormously rapid growth of the 
central-station properties of the country, you will, I am con- 
fident, find that the rapid increase in the amount of energy 
sold responds absolutely to the putting into use of liberal meth- 
ods of dealing with the company's customers. 

It matters not by what name you may call it whether you 
speak of it as the improvement of your load factor, whether you 
speak of it as creating a day load the fundamental reason 
for the success of the business in which we are engaged is as 



COMMERCIAL DEVELOPMENT 151 

much an appreciation of the proper methods of selling our 
product as the opportunity to use the many brilliant inventions 
which have been made by the great technical minds of our time. 

I am dwelling upon this subject not with any idea of be- 
littling the great achievements of the inventors and engineers 
whom it has been our good fortune to have had working in our 
interests in the fields of discovery and engineering, but for the 
purpose of impressing, more especially upon the younger men 
connected with our organization, the great importance of the 
commercial side of the business and to point out to them the 
advantage, alike to themselves and the business itself, of their 
bestowing upon the commercial side of the business as much 
thought, if not a greater amount of thought, as that which they 
bestow upon the technical operation and construction side of 
central-station development. 

As a manager of central-station properties it is often brought 
home to me that while it is comparatively easy to obtain first- 
class operating assistance, and while it is not a matter of great 
difficulty to obtain engineers of constructive capacity to design 
and build our central-station plants and systems, it is a far 
greater problem to obtain trained technical men who have made 
a thorough study of commercial conditions to take part in the 
commercial development of the business. I am inclined to 
think that if during the next quarter of a century we are to 
make relatively as great progress in the development of the 
central-station business as has been made in the last quarter of a 
century, it will be necessary for the technical institutions of the 
country to give greater prominence to the commercial side of 
the central-station business and, when qualifying their students 
in electrical engineering and mechanical engineering, to teach 
them more of the true conditions governing commercial de- 
velopment. 

To the young engineers engaged on the operating side of the 
business my advice is that they familiarize themselves with the 
commercial conditions under which the companies for which 
they work have to conduct their business. If they will give 
thought to the commercial side of the business and qualify 



152 ADDRESSES OF SAMUEL INSULL 

themselves to take part in the sale of the product of the com- 
pany, if they will devise new methods of selling the product, new 
methods for obtaining consumers of the energy produced by 
the central station, they will stand a chance of achieving dis- 
tinction and profit far greater than most of them can achieve in 
the operating and purely engineering side of the business. 

WHAT ARE THE REAL FUNCTIONS OF A CENTRAL STATION? 

The possibilities of central-station business, while great 
today, must be far greater in the future; and in trying to point 
out what those possibilities are it may not be amiss to discuss 
what is the real function of a central-station company. Is it 
simply to light the streets of the city, as most of the electric- 
lighting companies thought was their function twenty-five years 
ago? Is it merely to do house-to-house lighting, as was (with 
the incidental power connected with it) the business inaugurated 
by the few Edison companies a little more than twenty-five 
years ago? Should a central-station company be engaged 
merely in production of power for industrial purposes, or for 
railway purposes whether the railway be urban, interurban, 
state or interstate? Or should the central-station company 
embrace all of the functions stated above and produce all of the 
electrical energy needed in a given community or a given area? 

The maximum load of the electric-lighting business in this 
latitude comes in December and is accentuated by the industrial 
power load. The maximum load of the street-railway business 
comes more often in January than in December, especially in the 
Central West, owing to the conditions of temperature, involving 
heating as well as traction. The maximum load of the steam- 
railroad business, so far as I have been able to figure it, comes in 
the middle of the summer in Connecticut and Massachusetts, 
towards the end of September around New York city, and in 
October around Chicago and St. Louis. The maximum load 
of a waterworks comes in a great many instances, if ample 
storage is at an elevation, at the convenience of the producer; 
and in any event, it comes at a time of the year when the de- 



COMMERCIAL DEVELOPMENT 153 

mand for total energy used in a given community for other 
purposes is by no means at its maximum. 

Why should all these operations for the production of energy 
be dealt with on a separate basis? Why not concentrate them 
all, and by so doing get low cost of production, low capital 
investment (because of the elimination of duplication of in- 
vestment) and increased diversity of demand for energy, and, 
what is of vast importance, consequent low prices to all users, 
whether they be the occupant of a simple cottage, spending 
fifteen or twenty dollars a year for light, or a large railway 
system using fifty or seventy-five thousand kilowatts of energy. 

What I am advocating is merely the extension of the central- 
station idea. It is applying the same principle, on a very large 
scale, which underlies our business, which is the advantage of 
increasing the diversity of the demand and increasing the 
quantity of the output. 

If you will apply the arguments that you use to persuade a 
possible customer to give up his isolated plant to the larger 
questions of manufacturing and distributing electrical energy, 
you must come to the conclusion that our true function as 
central-station companies is not only to supply the energy 
required in the community in which we live, but also to supply 
the energy required to carry us to the next community when 
we go to visit our neighbor, or in any case to carry us part way. 

It seems to me that the development upon these lines 
must in the future inevitably occur. Already we have areas 
in the eastern and central western states where the [extreme 
distance of territory from one end to the other, exceeding fifty 
or sixty miles, is served from one distributing system. These 
areas are far exceeded on the Pacific Coast, where large water- 
power combined with steam stations serve a large extent of 
territory with central-station service. 

A few months ago the vice-president of the New York, 
New Haven and Hartford Railroad, before one of the official 
bodies of Massachusetts, said that in his opinion within the 
next fifteen years the New Haven Railroad, between New York 
and Boston, would be electrified throughout, and the towns on 



154 ADDRESSES OF SAMUEL INSULL 

the way would have the opportunity of obtaining electrical 
energy at a very low cost, the cost dependent upon the cost to 
the railway company, which, in his opinion, would necessarily 
be low because of the very large amount of business that they 
would have of their own. 



POSSIBLE ELECTRIFICATION OF STEAM RAILROADS 

The work of the New York Central and Pennsylvania rail- 
roads in the way of electrification has gone hand in hand with 
the work of the New York and New Haven Railroad, and if the 
steam-railroad people look forward to electricity being supplied 
at very low cost throughout Connecticut, Massachusetts and 
Rhode Island, as a result of the production of energy in large 
quantities for the electrification of the steam railroads in 
those states, the same thing must necessarily happen throughout 
the whole of the densely settled portion of the United States, 
if the reasoning of the vice-president of the New York, New 
Haven and Hartford Railroad be correct. 

But it would seem to me that our function as producers of 
electrical energy should, with the tendency towards electrifica- 
tion of steam railroads, become very much broadened; and in- 
stead of its being the exception, as it is today, for a central- 
station company to cover any large amount of territory outside 
of the municipality in which it is mainly established, its op- 
erations will become far more extensive. If the steam-railroad 
men of the country want electrical energy produced economi- 
cally, they should find it to their advantage to come to us as 
specialists in the manufacture of electrical energy, taking ad- 
vantage of our experience in the best methods to pursue, taking 
advantage of combining their necessities for electrical energy 
with the necessities existing in the communities in which we 
operate, which combination will result in economies which 
neither can obtain separately. This will lead to the establish- 
ment of large central-station plants capable of supplying all 
the requirements in the way of electrical energy for a large 
area of territory surrounding the centers of population. 



COMMERCIAL DEVELOPMENT 155 

If our members will do their share towards working to such 
a desirable end, the possibilities of electrification of steam rail- 
roads will be brought much nearer to us. The financial burden 
of making the change would be divided, the steam railroad pro- 
viding the necessary capital for electrifying its right-of-way and 
changing its rolling stock, the central-station companies of the 
country providing the capital for building the large generating 
stations and transmission lines to convey the electrical energy 
to the railroads and other consumers along the right-of-way. 

REGULATION AND MONOPOLY 

Before closing my remarks I desire to refer to the relation 
which the central-station business bears to the communities 
in which we operate. The business in which we are engaged 
can be most successfully operated as a monopoly business. 
If the communities which we serve are to get electrical energy 
at the lowest possible cost, they can only expect to achieve this 
by preventing duplication of investment and by concentrating 
production under one organization. The fact that low prices 
cannot be permanently obtained by the old method of encourag- 
ing competition is being very generally recognized today; and 
as this becomes more and more recognized, the regulation of our 
business, our methods of conducting it, our methods of financing, 
will be subject more and more to governmental supervision in 
some form or other. 

This demand for supervision, while it certainly is a trend 
of the times, is also an appreciation on the part of the people 
of this country that the destructive effect of competition in 
public-service business ultimately means greater burdens on 
the community through the maintenance of high rates to give a 
return on the excessive capital tied up as a result of duplications 
of plant. Fortunately for us, living as we do in a country 
having had tremendous developments and capable of almost 
unlimited development in the future, this policy of competitive 
regulation has had a limited effect only, as the growth in the 
communities in which we operate and the fact that our business 



156 ADDRESSES OF SAMUEL INSULL 

has by no means reached a point of saturation in the large and 
small cities of the country have enabled us, from increased 
business, to absorb and bring into active use a great deal of the 
capital which during the period of competition seemed to be an 
unnecessary waste. 

It should be borne in mind that the more closely our business 
is supervised and regulated the greater are the chances of our 
being protected against ruinous competition, which today is 
mainly instigated by those who desire to take this means of 
acquiring our existing business. While we may not care to be 
hampered by the rules and regulations established by com- 
missions created to watch over our operation, the further these 
commissions go into our business the more will they be con- 
vinced that the best results can be obtained only by regulated 
monopoly, and that competition is alike as ruinous in the long 
run to our customers as it is to the central-station company 
itself. The result will be that our monopoly of the business 
will be secured, our securities will stand in higher credit and 
new capital will come flowing into our coffers for the extension 
of our business. I do not myself view with any alarm the 
proper regulation of the business in which we are engaged, but 
feel that its stability may be greatly increased thereby. 

FRIENDLY RELATIONS WITH CUSTOMERS 

There is another phase of our relations with the community 
which all of us should do our best to foster. I refer to a friendly 
feeling of relationship between the public-service corporation 
and its customers. As a rule the tax collector is not supposed 
to be popular; and many people look upon payments which 
come regularly every month for the use of a public utility as 
more or less in the form of taxation; but I do think that it is 
possible for a central-station manager, by liberal methods of 
dealing with his customers and by absolute fairness whenever 
there is a matter in dispute, to encourage a feeling of friend- 
liness towards the corporation which will build up a valuable 
asset in the shape of good will. 



COMMERCIAL DEVELOPMENT 157 

Unfortunately, in the last few years there have been a 
number of people engaged in arousing a spirit of hostility to the 
corporate interests of the country. I do not refer alone to 
corporate interests running natural or artificial monopolies, for 
this agition has been directed as much against the mercantile 
business run on a large scale in the form of a corporation as 
against the public-utility corporation, whether municipal, 
state or interstate. A great many of the people engaged in 
this class of agitation have done it to serve their own particular 
ends; others, highminded and honest citizens, have thought 
that the interests of the state were menaced by corporate 
monopolies and that only by agitation could these interests 
be preserved. 

But no little damage has been done to the corporate in- 
terests of this country by the action of some officials of cor- 
porations, who seem to have had much concern for the profit 
of the moment and little or no concern for the permanency of 
their investment in the future. We central-station managers 
ought to look upon ourselves as semi-public officials and so 
conduct our affairs with the community as to give us the ad- 
vantage of a reputation for absolutely fair and impartial deal- 
ing. We should preach the same doctrine to our subordinates 
and insist upon the same policy being carried out in their deal- 
ings with the public. If such a course is pursued, we will not 
only be helping to improve the opinion of the community of 
corporations generally, but will be establishing our own business 
on so firm a basis as to add to the permanency of our investment 
and give promise of prosperity in the future. 



EMPLOYEES URGED TO STUDY ECONOMIC 
QUESTIONS' 

ONE OF the greatest pleasures that a busy man can 
possibly enjoy is the good will of those associated with 
him. No greater pleasure is ever afforded me than to 
meet with those whom it is my privilege to work with and to 
lead in this great enterprise of electricity supply which we 
have been engaged in developing during the last two decades. 

Before saying anything about our own business, I want to 
say a few words to you about the National Electric Light 
Association. The National association is the leading body 
in every respect in this great industry, representing a capital 
of upwards of a billion and a quarter of dollars, and its influence 
is felt in every community, an influence exercised alike for the 
good of the communities in which our member companies 
operate and for the benefit of the companies themselves. 

If, in going to different parts of the country to look into 
some electric properties, you happen to find a property that is 
run down at heel, with plant in relatively poor condition, whose 
organization is at odds with the community with which it has 
to do business, and whose methods of business are ten years 
behind the times, you can be pretty sure that that company is 
not a member of the National Electric Light Association. If 
that company were a member of the association, and if its 
officials attended the national conventions and took advan- 
tage of the accumulation of information produced by the best 

1. Mr. Insull has been an earnest advocate of co-operation in the electrical 
industry, both in the larger sense, as represented by the national societies, and 
in his own organizations. In particular he has been a warm friend of the Na- 
tional Electric Light Association, and he has given the company sections of that 
organization every encouragement. The address given here was delivered at 
the annual meeting and dinner of the Commonwealth Edison Company Section 
of the National Electric Light Association in Chicago on November 1, 1910. 

158 



INTERESTS OF EMPLOYEES 159 

brains of this, one of the foremost industries of our times, it 
would not be possible for such a company as I have spoken 
of to be satisfied with the results achieved. 

ADVANTAGES OF MEMBERSHIP IN COMPANY SECTIONS 

The development that has taken place in the last two or 
three years leading to the establishment of the company 
branches or sections of the association must finally place the 
men who fail to recognize the benefits that they can obtain by 
becoming members of the company sections in relatively the 
same position, so far as their own company is concerned, as is 
occupied by the electricity-supply companies that fail to rec- 
ognize the noteworthy benefits of joining this association. I 
cannot urge upon you too strongly, I cannot urge upon those 
who, unfortunately, are not in this room, and who are connected 
with the Commonwealth Edison Company, the benefit that 
they can obtain, the absolutely necessary knowledge that they 
can obtain, if they will profit by the advantages that can be ob- 
tained from membership in the company section here in Chicago. 

I was very much struck with the remarks of your incoming 
chairman, 1 his reference to the low percentage of members of 
this branch who have left our company's service, and his refer- 
ence to the fact that the members of this branch enjoy a higher 
average pay than the non-members of this branch, working 
for the Commonwealth Edison Company. It is pretty good 
evidence that the best brains of the company are represented 
in this room. I am not given, as you know, to throwing 
bouquets; but the very best way that you can fit yourselves for 
positions higher up in this great industry, positions which are 
open to all of you, just as much as they have been open to me 
and to the other gentlemen sitting at this table the very 
best way that you can fit yourselves for future advancement, 
enabling you to deal not only with the particular work that you 
are doing at the moment, but with work of much greater conse- 
quence, and consequently bringing much greater pay; the 

1. Mr. Ernest F. Smith, superintendent of substations for the Common- 
wealth Edison Company. 



160 ADDRESSES OF SAMUEL INSULL 

very best way that you can fit yourselves for such positions and 
be candidates for advancement in our company organiza- 
tion is to devote yourself to the work which is before you in 
the Commonwealth Edison Company Section of the National 
Electric Light Association. 

This is the twenty-sixth year of the existence of the National 
Electric Light Association. I well remember attending a meet- 
ing some twenty-four years ago in the old Grand Pacific Hotel, 
when it was impossible to muster more than about one-sixth 
of the number in this room tonight as representatives from all 
over the country of the great industry with which we are associ- 
ated. And in recalling that occasion, I cannot refrain, at the 
cost of the reiteration, of rendering my tribute to the enormous 
influence that this association has had on our industry; to 
the broadening effect that it has had on all of us who have 
attended the national conventions, and to the vast amount of 
information that we have obtained by the exchange of ideas 
and the discussion of those ideas as to the best way of operating 
the business. 

I rather think that we plume ourselves too much on the 
number we have in the Commonwealth Edison Section of the 
National association. A very good test of the number of mem- 
bers we ought to have would probably be the numbers of em- 
ployees of the Commonwealth Edison Company who have the 
right to join our savings fund. At the present time we have 
on our payrolls over 2,000 men who have been with us upwards 
of a year, and consequently have the right to join that fund. 
And yet only 485 of those men have recognized the benefits 
that they can gain by becoming members of the company 
section. 

THE BEST INVESTMENT A MAN CAN MAKE 

Mr. Freeman 1 has very kindly referred to the Common- 
wealth Edison Company as the premier organization of its 

1. Mr. W. W. Freeman, who was a guest at the dinner, was then the 
president of the National Electric Light Association. For a number of years 
Mr. Freeman was vice-president and general manager of the Edison Electric 
Illuminating Company of Brooklyn. In 1914 he became president of the 
Union Gas and Electric Company of Cincinnati. 



INTERESTS OF EMPLOYEES 161 

kind the world over. I think his kindness in that respect is a 
little exaggerated, but still we will accept the compliment as 
blushingly as we may, Mr. Freeman. Now, if we are the pre- 
mier organization anyway we will accept it for the purpose 
of argument if we are the premier organization in the elec- 
tricity-supply business, it is but natural that we should have the 
premier organization as a section of the National Electric 
Light Association. Instead of being satisfied with only a little 
over 20 per cent of the employees of our company as members 
of this organization, we should not be satisfied until we can 
get every man who is qualified to join our savings fund as a 
member of this company section. 

It matters not whether a man is in the contract department, 
or in the operating department, or the auditing department 
the employees of all departments can obtain much benefit by 
the knowledge that they would get of other branches of the 
business if they would become members in this company section. 

I hope when we meet again a year from now that our mem- 
bership will be doubled. 1 It certainly ought to be. The men 
who have the right to join the section can well afford to do it 
from a financial point of view. It is the best possible invest- 
ment they can make, as I naturally assume that all of them 
hope to get along and rise to positions of authority in this 
business either here in Chicago or elsewhere. So much for 
the company section. 

SOME STATISTICS OF TEN YEARS' GROWTH 
I was casting around this afternoon, or rather yesterday 
afternoon, for something on which to pin my speech here this 
evening, and one of my very kind assistants reminded me that 
at a dinner of the employees of the old Chicago Edison Company, 
held at Henrici's old restaurant on Adams Street, some ten 
years ago, I made the statement that it was not at all beyond 
the range of possibilities that the corporation with which we 
are all connected, and justly proud of being connected with, 
would some day have invested in its business upwards of a 

1. It was more than doubled at that time. See "Opportunity for Ad- 
vancement," page 234. 



162 ADDRESSES OF SAMUEL INSULL 

hundred millions of dollars, and I even ventured the statement 
that the Harrison Street generating station, which at that 
time was probably the first or second generating station in 
the country, would ultimately become a substation. And 
our genial secretary and treasurer, 1 who heard the remark, 
reminded me that about the same time I made a similar remark 
at a meeting of the board of directors of the old Edison com- 
pany, and when I intimated that I thought we might at some 
time have employed in our business a sum equal to a hundred 
millions of dollars, some of the directors looked askance and 
wondered whether my reason was a little affected. 

Now, what have we done in the period that has gone by 
since that pleasant little dinner we had at Henrici's? I have 
had some figures gathered together here which I thought would 
interest you as showing the growth of our business. 

Our connected load expressed in 16-candlepower equivalents 
in the year 1899 was 769,115 lamps; in the year 1910, expressed 
the same way, it amounts to 8,143,908 lamps. In 1900 we 
had 13,919 customers and in 1910 we have 124,607 customers. 
The maximum load in 1900 was 14,260 kilowatts, or was a little 
over 19,000 horse-power; our maximum load last winter was 
158,000 kilowatts, a little over 211,000 horse-power. Our 
maximum load this winter will probably run up to 185,000 
kilowatts, a little over 240,000 horse-power. 

Our kilowatt-hours generated in 1900 were 34,370,000 
kilowatt-hours, an amount which we do not think much of 
billing to one customer at the present time. Our kilowatt- 
hours generated for the fiscal year just closed, to the end of 
September, were 601,712,335 kilowatt-hours, a greater output 
than that generated in any city of the world, even in the great 
city of London, with its six millions of people and covering an 
area almost the equivalent, I think, of one of the smaller states 
of the Union. In 1900 we had nine generating stations run- 
ning. Today we have three generating stations running, and 
I suppose one of those will inevitably go out of use within the 
next few years. 

1. Mr. William A. Fox, made vice-president of the company in 1914. 



INTERESTS OF EMPLOYEES 163 

In 1900 our load factor, which, after all, is the controlling 
element in the question of making or losing money, rather than 
the selling at a high price or at a low price our load factor 
was a little under 29 per cent. In 1910 our load factor was a 
little over 41 pier cent. In 1900 our gross earnings were $2,- 
650,058, and for the year ended September, 1910, they were 
$13,083,725. The total money employed in our business in 
1900 was $14,391,971, and the amount of money employed in 
our business at the present time is $67,500,000. In these days 
when so much is said about corporations not bearing the bur- 
dens which they ought to bear, I deem the item of taxes which 
we pay on personal property and real estate, Federal taxes 
and compensation to the city as one of the most important 
in our business. In 1900 our taxes and municipal compensa- 
tion amounted to $90,773. In the year just closed these items 
amounted to $968,262. 

If you will make a comparison of our figures with those of 
other companies, I do not think it is stretching the facts to say 
that we have about a third more customers than the largest 
company of this country. We put out about a third more 
kilowatt-hours, and we receive for it about a third less dollars. 
I think that statement is the best that I can make as to what 
we are doing for the community in which we operate. 

Remember, if we are looking for success, if we are looking 
forward in the future to greater increases in our business, to a 
greater security for the capital employed in it, we can only get 
that success and get that security by serving the community 
in which we live, fairly, honestly and economically. If we 
pursue the policy of dealing fairly with the community, I have 
no doubt that the figures that I have named will be far exceeded 
in the future, away beyond anything that we have expected 
in the past. 

POSSIBILITIES OF THE FUTURE 

What I have had to say about the possibility of membership 
in this section of the National Electric Light Association and 
the fact that we probably pride ourselves a little too much on our 



164 ADDRESSES OF SAMUEL INSULL 

having the largest section applies equally to the business of the 
corporation for which we are all working. As near as I can 
figure, from the information obtained for me by our statistical 
department, the possibility of growth in the future is so great 
that I am inclined to think that our optimistic friend, the chief 
operating engineer, Mr. W. L. Abbott, will have to jack up his 
figures. I believe that if we had all the business that it is 
possible to do in this community at the present time with the 
present population that we have in this city, it would be quite 
possible to do a business of about 600,000 kilowatts of maximum 
demand. The field that is open to us today (and that is a 
subject which every one of you individually is very greatly 
interested in) is to my mind three times as large as the field 
we actually occupy. I do not mean to say that we can ever 
expect to get one hundred per cent of the possible business, 
but that ought to be the high mark, the goal which we should 
attempt to attain. If we ever can achieve that position, it 
will be greatly to the benefit of every one of you, just as much 
as it would be to the benefit of myself and those more closely 
associated with me, and just as much as it would be to the 
benefit of those who provide the capital, and provide it so 
liberally, to enable us to operate on the large scale on which we 
are operating in this city. 

LABOR AND CAPITAL PAID ABOUT EQUALLY 

That brings me to another subject, and that is, What be- 
comes of the money that we spend? How much of it in the 
form of wages goes to you and to me and the other employees 
of the Edison Company, and how much of it, in the form of 
interest and dividends, goes to those who provide the capital 
to develop the business? Capital is entitled to its wages in 
the shape of interest and dividends just as much as labor is 
entitled to be paid in the shape of wages or salaries. 

For the year ended September 30, as I have just told you, 
our total income amounted to $13,083,725. In the same time 
we invested nearly six millions of dollars in new plants. During 



INTERESTS OF EMPLOYEES 165 

that time we paid out for labor directly from the company and 
through our contractors who do our construction work the large 
sum of $3,250,000. During the same period, we paid out for 
dividends and interest $3,114,000. 

Now, if any one of you were proposing to start in business for 
himself, the class of business being such that the labor in it 
could all be performed by yourself, and if some capitalist came 
along and told you that he would provide you with capital, 
providing that you would take your pay in one-half of the 
profits and he would take his pay for the use of his money in one- 
half of the profits, you would consider that a pretty liberal 
proposition. That is practically the condition under which 
this great business is operated. On the one hand we have about 
3,000 employees; on the other hand we have about seventy 
millions of dollars invested in our business. After paying 
operating expenses, that is, after paying for material, after 
paying about $1,400,000 for coal, about $1,000,000 for taxes 
and compensation and large sums for other classes of material, 
the employees receive about one-half of what is left a little 
more than one-half. They receive $3,250,000. The capital 
employed in the business receives for its wages (and, as I have 
stated, money is just as much entitled to be paid its wages as 
labor is) a little less than you do; it receives $3,114,000. So 
you get about one-half of the net results. 

EMPLOYEES SHOULD STUDY ECONOMIC QUESTIONS 

Now, what does this mean? It means that anything that 
will work an injury to capital works an injury just as much to 
labor. I am inclined to think the figures that I am using would 
probably apply to every large electricity-supply company the 
world over. I think you will find that labor, as a rule, gets 
just about one-half of the net results. In other words, the 
capitalist puts his money into the business and he takes his 
pay in one-half of the profits, and he gives to labor the other 
half of the profits. 

This should bring home to every one of us not alone 



166 ADDRESSES OF SAMUEL INSULL 

to the president of the company, or the vice-president of the 
company, but to every man engaged in the organization, right 
down to the lowliest employee the absolute necessity, if he 
wants to protect his own interests, of working in season and out 
out of season, not alone at his desk in the office, or in a generat- 
ing station, or a substation, but everywhere he goes. If 
he wants to serve his own interests, or, to bring it down to a 
little more homely statement, if he wants to protect his own 
pocket, he should study the questions governing the control 
and the regulation of the corporation for which he is working. 
In work time and in play time he should do whatever he can to 
shape public opinion, to persuade others (as those who study 
inside the organization must be fully persuaded) that our 
policy, under all circumstances, is to try to do the fair thing 
and the right thing as between our corporation and the great 
community in which it is our privilege to do business. 



SELLING OF ELECTRICITY IN LONDON 
AND CHICAGO COMPARED 1 

I FEEL somewhat embarrassed at the introduction that Mr. 
Byllesby has given me, because it would be natural to sup- 
pose that as I had made a special effort to be here this week 
(in fact, with great regret I left London a week ago last Satur- 
day, when I had in mind the meetings here and the dinner later 
in the week) I had prepared a set speech. I have not done 
anything of the kind. I have been away on a holiday, and 
since I returned last Saturday morning I have not had a chance 
to prepare a set speech. 

I was just leaving my friend Mr. Herman H. Kohlsaat, 
of the Chicago Record-Herald, at the lunch table, and I told him 
it was ten minutes to two o'clock and I had to start delivering a 
speech at two o'clock and I wished he would give me some ideas 
to talk on. The only thing he could suggest was, "Early to 
bed, and early to rise; work like Hades, and advertise." 

Now you might ask, What has that to do with central- 
station business? If people go to bed early, perhaps they will 
not consume much electricity for lighting purposes. If you 
will get your business into the condition it should be in it 
matters not whether it is in a large center of population, like 
New York, or Boston, or Chicago, or in a small center of popula- 
tion you will be practically independent of whether the 
people go early to bed or not. That is our situation here in 
Chicago. Only 27 per cent of the energy that we put out is 
used for lighting purposes, so it is quite immaterial to us whether 
they go to bed early or not. We are somewhat interested in 

1. Speech at the second annual convention of H. M. Byllesby & Company 
and affiliated companies in Chicago on January 18, 1911. In his introduction 
Mr. Byllesby said that Mr. Insull came from London for the especial purpose 
of attending the convention. 

167 



168 ADDRESSES OF SAMUEL INSULL 

their rising early, because we want the load to start as early in 
the morning as we possibly can get it. 

On the question of "working like Hades," any man who 
does not want to work any man who is looking for the life 
of one "born with a silver spoon in his mouth" had better get 
out of the operating side of the electrical business, as all such 
men have had to get out of the manufacturing side of the 
electrical business. 



VALUE OF NEWSPAPER ADVERTISING 

On the question of advertising, my friend, Mr. Kohlsaat, 
had in mind his load factor; just as we all have in mind all the 
time our load factor. I do not know any better way to in- 
crease your load factor than by increasing the load factor of 
your local press by advertising very steadily. The result of 
daily newspaper advertising here in Chicago has been largely to 
increase the productive capacity of our canvassing force. It 
is an unusual thing for us to send a canvasser to visit a possible 
customer in the thickly settled portion of the city, unless that 
possible customer has either written us or telephoned asking 
us to send a man to see him. Of course, I do not refer to the 
larger business the obtaining of big industrial power busi- 
ness, or the very large lighting business, such as shutting down 
an isolated plant; but I refer to the business obtained from 
house to house. We do not have to send our canvassers to- 
day to visit eight or ten houses before they can discover a 
possible customer. 

Daily newspaper advertising, properly written, and per- 
sistently presented to the public, has had the result of so in- 
creasing the demand for our product that in the downtown 
district and the thickly settled residence districts our business is 
obtained from people who first invite us to call on them. You 
all know, as sellers of goods, whether those goods be electrical 
apparatus or the kilowatt-hour, that it is a great advantage to 
the seller to have the purchaser come to him first. So much for 
Mr. Kohlsaat's text for me. 



LONDON AND CHICAGO 169 

GET ALL THE BUSINESS IN THE COMMUNITY 

I have not any new subjects to present to you. I have 
simply the same story to repeat here that I gave utterance 
to at the last convention a year ago. One thing for you to aim 
at all the time is to produce all of the energy that is required in 
your community for whatever purposes that energy may be 
used; and in aiming at that happy result you, of course, have 
got to have a highly economical plant, which you certainly get 
with the engineering ability that is back of you in H. M. 
Byllesby & Company. You have got to quote prices based on 
the character of the service demanded of you, and thus invite 
that class of business that will lead to the best possible load 
factor that is, the greatest possible average use of every 
dollar invested. You have got to get a bigger proportion of 
the business in the smaller cities; you have got to give really 
more attention to scientific methods of selling your product. 
There are less possibilities of obtaining business in the smaller 
towns and consequently you have got to get all the possible 
business in a given community. 

It is an easy matter to handle these things in a very large 
city, and we who run the large companies, in talking to those 
who run the small companies, often fail to appreciate the greater 
difficulties that the people in the smaller cities have to deal with. 
I myself would fail to appreciate it if it were not for the fact 
that from time to time I have invested large sums of money in 
the development of small properties throughout the country. 

Here in Chicago our maximum load this present winter is 
practically 270,000 horse-power. If we were doing all the 
business which it would be possible for us to do in this com- 
munity; that is, if we could shut down all the isolated plants; 
if we could shut down all of the power plants operating industrial 
establishments; if we could shut down all of the power plants 
operating elevated-railway service; if we could transform the 
terminals of the steam railroads into electric operation over 
night and dispense with steam locomotives it would be 
possible for us in this community to get a load, with the present 



170 ADDRESSES OF SAMUEL INSULL 

population, of somewhere between 750,000 and 1,000,000 
horse-power. So you see we can afford to pick and choose our 
business. Even leaving out the electrification of the steam 
railroads, which, after all, would consume a relatively small 
amount of power as compared with the operation of the big 
surface transportation system in a large city even leaving out 
the steam railroads, there is probably 750,000 horse-power of 
possible business within the city limits of Chicago. We do 
not have to persuade every man that our scheme of generating 
and supplying energy is the best and the cheapest. As long 
as we get every third man we can do a pretty good business and 
can employ about all the capital that we can conveniently 
raise from year to year. 

FIXED RELATION BETWEEN COST AND SELLING PRICE 

But that situation, as I have said, does not exist in the 
smaller places. In order to reduce the cost of energy to the 
lowest possible figure, and consequently reduce your selling 
price, at a profit, to the lowest possible figure, you should have 
all the business in all the communities in which you operate. 
You should have the pumping of the water, the running of 
the street-car lines, the city lighting, the domestic lighting, 
the running of all the industrial establishments that you 
may have in the community in fact, all the possible 
business in your community. And then, after you get that, 
you should go after the business in the next community, ten, 
fifteen, twenty, or twenty-five miles away, and by a further 
concentration of the manufacture of energy, reduce your cost, 
and consequently later on reduce your selling price. Because, 
after all, I care not, gentlemen, whether we are regulated by a 
city council, whether we are regulated by a state commission, 
whether we are regulated by that greater and still more potent 
force public opinion there can never be much more than 
about the same relation between the cost price and the selling 
price. 

As rapidly as you are able to reduce your cost, either as a 



LONDON AND CHICAGO 171 

matter of self-interest, or, if you can't see your own self-in- 
terests, then as a matter of compulsion and, to my mind, 
proper compulsion you will have to reduce your selling price. 
The chances are that for every saving that you can make in the 
cost of production whether you get that saving from con- 
centration of production for a number of small towns operated 
from one central plant, or whether you get that saving in cost 
of production from the concentration of the production of all of 
the energy required in a given community in one central 
station you will have got to reduce your price. And it is 
very proper that you should do so. 

WHAT MIGHT BE DONE IN LONDON 

I do not know of any better instance of the opposite of 
what I have stated than what is still going on in the great 
city of London, or rather, I would say, in the county of Lon- 
don. The City of London has a very small area, only about a 
mile square. The county of London is more thickly populated, 
I think, than the City, because people do not live in the City; 
they go there for business. I think the county of London has 
a population of something like six or seven millions. In the 
county of London there are 63 different electricity-supply 
undertakings, either privately owned corporations or munici- 
pally owned plants, for the production of electrical energy. 
In addition, the underground railroads have their separate 
source of production, and the London County Council, which 
operates most of the surface transportation in London, has its 
separate source of production. 

What is the result? With between six and seven millions 
of population, the output of electrical energy in the county of 
London is about 500,000,000 units (kilowatt-hours) a year. In 
Chicago, with a population of about 2,250,000, the output of 
electric units is about 700,000,000. The situation should not 
only be reversed, but instead of 500,000,000 units being pro- 
duced and sold, or used for traction purposes, within the 
county of London, there should be at least three times that 



172 ADDRESSES OF SAMUEL INSULL 

amount, or upwards of double the amount of energy that we 
sell here in Chicago. 

What is the reason for the difference? There is probably 
no better field anywhere in the world than the county of Lon- 
don for the economical production of energy, and its large sale 
on a wholesale and retail basis. Apart from the requirements 
in the ordinary everyday life of the six to seven millions of 
people, whether it be for transportation purposes or for lighting 
purposes, London is the center of a tremendous manufacturing 
interest. This fortunately, in some respects, for its inhabitants, 
is largely in the form of small manufacturing interests a class 
of manufacturing especially favorable to the central-station 
manager in soliciting business. On account of the condition 
of the laws with relation to electric lighting and some conditions 
as to the acquisition of properties after the expiration of 
franchises, and some conditions which permit small municipal- 
ities within the larger area of London to do their own lighting 
business, they have a very high average cost, and consequently 
must have a high average selling price. I have not at hand the 
present cost within the London area, but the last time I made 
the comparison from official government returns a few years 
ago, the average cost of electrical energy within the area of 
London was about as great as the average income that we get 
here in Chicago, and we have to pay interest on our money and 
make profits for ourselves out of the price that we get for the 
electricity. 

DON'T GET DISCOURAGED; GET THE BUSINESS 

Now, if that condition exists here, as to low cost of produc- 
tion and low selling price, and a volume of consumption fully 
forty per cent greater for a population of about one-third, 
the same conditions must exist in smaller places, if proper 
attention is not given to this question of the massing of produc- 
tion and of low selling prices. And let me tell you that low 
selling prices and massing of production mean a high earning 
capacity for the dollar invested. 



LONDON AND CHICAGO 173 

The story I am telling is old a story that you are all very 
familiar with. No one is more familiar with it than Mr. 
Byllesby. If I were looking for the fundamental causes of the 
success of H. M. Byllesby & Company, I think I would find it 
in the purchase of properties for which you have to pay good 
average prices, the consolidation of those properties, and, wher- 
ever it is possible, the massing of the production of the product 
which you sell so as to produce at the lowest possible selling 
price. As I have said, I have no new story to preach. It is 
simply to carry on the same work in the same way that we have 
been going for the last ten years, let us say, because, after all, 
the great impetus to central-station business has taken place 
since 1900. The great additions of capital invested in it and 
the stimulus that that has given in vast extensions of the 
business have all taken place in the last ten years. 

The men in this room to whom I particularly wish to address 
my remarks are the men who feel discouraged at the results 
they are getting the men who have low increases in their 
business as compared with previous years. These are the men 
that I want to reach. Of course, you may find in isolated 
cases that the fault is with the community that the com- 
munity does not grow. But I firmly believe that in ninety per 
cent of the cases where people fail to obtain success in our line 
of business, the fault is not with the material that you have to 
deal with the fault is with yourselves. 

Again let me appeal to the men who come here and see an 
enthusiastic, optimistic throng, and who fail to get rid of their 
pessimism while they are here. If you will go home and get all 
of the business offered in your community and if you can't 
get it at one price I am sure the people in charge of operation 
in H. M. Byllesby & Company will authorize you to get it at a 
lower price but get all the business. If you get all the 
business, you are bound to develop a successful concern and 
get a handsome return on the money invested in that business. 



"SATISFY YOUR CUSTOMERS" 1 

PERHAPS it may be of interest to you if I draw some- 
what on my experience of the last thirty years in the 
central-station business in addressing you this evening. 
The first central-station plant started in the United States 
was in the Central West, at Appleton, Wisconsin. I am under 
the impression that it was run from the water-power at Appleton, 
but of that I am not quite sure, as far as the first plant installed 
was concerned. That plant was started on April 20, 1882. I 
speak of it as the first central-station plant, because it was the 
first multiple-arc system started in this or any other country 
for the purpose of selling electrical energy to consumers in the 
same way that gas is sold to consumers over meter. The 
first large station started was in New York city a few days 
later about fourteen days later than the one started at 
Appleton, Wisconsin. It had been installed by the old Edison 
Electric Light Company, the company that held the Edison 
patents, for the Edison Electric Illuminating Company of 
New York. If I am not greatly mistaken, your president, Mr. 
Byllesby, as one of the assistants in the engineering department 
of the Edison Electric Light Company, made the drawings 
for that first large central station started anywhere on either 
side of the Atlantic. 

We people in the electrical engineering business have com- 
mitted all kinds of errors, especially in connection with the 
mechanical engineering part of our business; but it is rather a 
remarkable thing that the first station of any magnitude that 
was built employed direct-connected units of course not of 
the type that we are using at this time, but still with the 

1. A speech, somewhat condensed, tlelivered at the banquet of H. M. 
Byllesby & Company and affiliated companies in Chicago on January 20, 1911. 

174 



GOOD-WILL AS AN ASSET 175 

dynamo directly connected to the shaft of the prime mover. 
Later, we strayed away from that method, but have come back 
to it as the true method of engineering in connection with our 
business. 

INVALUABLE ASSISTANCE OF FINANCIAL HOUSES 

The days that followed the starting of the plant at Appleton, 
Wisconsin, and the plant on Pearl Street, in New York, were 
pretty dark days for the central-station business. It took a 
number of years to demonstrate the earning capacity that the 
business possessed, and instead of the business going ahead in 
the large centers of population, we were forced to look afield 
to the small towns of Massachusetts and Pennsylvania, where 
capital could be raised in small amounts, locally, for the purpose 
of establishing central-station plants. It was not until some 
years later that we were able to obtain the financial assistance 
of the large financial houses of New York, Boston, and Phila- 
delphia; consequently there was some delay in establishing the 
large plants which we look upon today as more or less com- 
monplace. And if it had not been for the very generous sup- 
port accorded the business by such houses as Drexel, Morgan 
& Company of New York, I think that the development of the 
business would have been still further delayed. Those of us 
who have been in this business since its inception must have 
the warmest possible regard for the great financial house of 
which Mr. Morgan is still the head, 1 and which house rendered 
such marked and invaluable assistance in the development of 
the central-station business in this country. 

TRIBUTES TO WESTINGHOUSE AND SIEMENS 

At the time the central-station business started we had to 
use lamps that consumed 6.5 watts per candle, and it was not 
until 1890 that we got the 3.1-watt lamp, and it was not until 
the last year or so that that great advancement was surpassed 

1. Mr. J. Pierpont Morgan died on March 31, 1913. 



176 ADDRESSES OF SAMUEL INSULL 

by the invention of the tantalum, and following that the tung- 
sten lamp, which have reduced the consumption of current so 
enormously as to bring our product within the reach, practically, 
of the poorest homes of the communities in which we operate. 

The next great step after the invention of the three-wire 
system was the introduction in 1886 of the alternating-current 
system by the Westinghouse Company. I believe the first 
plant was installed by them at Greensburg, Pennsylvania 

MR. BYLLESBY: Great Barrington, Massachusetts. 

MR. INSULL: Mr. Byllesby corrects me, and says that 
the first plant was installed at Great Barrington, Massachusetts; 
but I think these two plants must have been installed some- 
where about the same time. I don't think it is possible for us 
to say enough of the wonderful service rendered this great 
industry by Mr. George Westinghouse and his associates in the 
work they did in connection with the introduction of alternat- 
ing-current apparatus for use for central-station purposes. 

The next great step was the building in 1890 to 1891 of 
slow-speed electric-generator units, this being the first step in 
the reduction of the investment costs of the central station, 
and also resulting in reducing the operating costs of the energy 
here produced. I am inclined to think that we have to go 
across the water for the first examples of this class of work; 
that is, the marine type of direct-connected steam generator 
outfits. We owe their introduction, if my memory serves me 
correctly, to the great house of Siemens & Halske, of Berlin. 
Especial honor is due to the great head of the house, the late 
Werner von Siemens, for his contribution to the inventive and 
engineering department of our business. 

The introduction of direct-connected units of the marine 
type, with highly economical prime movers in the shape of 
triple-expansion engines, made possible and was followed in 
1896 by the introduction of high-tension alternating transmis- 
sion lines, operating substations. Direct-connected dynamo 
units of high efficiency, and high-tension transmission lines 
and substations forced an abandonment of small generating 
stations and compelled us to mass the production of energy on 



GOOD-WILL AS AN ASSET 177 

a very large scale, either for the service in large cities like 
Berlin, New York, Chicago and Philadelphia, as well as the 
massing of production for supplying current to a number of 
smaller places, of which you have so many examples in the 
plants which you yourselves operate. The centralization of 
production and increased business demanded prime movers of 
greater size, lower investment cost and lower operating cost, 
which resulted in the development of very large steam turbo- 
generators, operating today in units of upwards of 20,000 horse- 
power; and within the next few months we hope to have operat- 
ing in this city units of upwards of 30,000 horse-power each. 

CENTRAL-STATION RESULTS IN CHICAGO 

The central-station business was developed at quite a 
late day here in Chicago. The company that was started at 
Appleton, Wisconsin, in 1882, was started by a merchandizing 
company which was the predecessor of the company here in 
Chicago of which I have the privilege to be at the head. It was 
known as the Western Edison Light Company. But that com- 
pany confined its efforts for a number of years, from 1881 to 
1888, to isolated-plant business, and it was not until 1888 that 
the first central station was started in this city at 139 Adams 
Street. 1 In 1892, which is the first year that I have any detailed 
records of, we had a maximum load of about 4,000 kilowatts. 
This present winter we have had a maximum load of over 183,- 
000 kilowatts. So that you will see, over the period from 1892 
to 1910, that our business has doubled on an average of a little 
better than once every three years. 

Our coal consumption this year will be upwards of 1,000,000 
tons; and if we used the same number of pounds of coal per kilo- 
watt per hour as was used ten years ago, the coal consumption 
would be nearly three times that amount. Or, in other words, 
we have been able to improve the efficiency of our system prac- 
tically 300 per cent in the period of ten years. I do not mean to 
say that that improvement has been entirely with the prime 

1. See note on page 319. 



178 ADDRESSES OF SAMUEL INSULL 

mover. I am talking of the energy delivered to our customers. 
The fact that we have been able to bring about such a great 
improvement in ten years shows how materially the efficiency 
of our distributing system, as well as that of our prime movers, 
must have improved during that period. 

Our experience here in Chicago is not peculiar to us. If 
the statistical figures of most of the companies which you 
represent had been carefully kept over the last ten years, you 
would find practically the same relative improvement in the 
plants in the smaller cities throughout the country. The 
progress which has been made, you may say, is marvelous. 
The real progress in our business has been all since about the 
year 1900. And I would venture to say, in looking at the mat- 
ter from the point of view of the public, that nine-tenths of the 
improvements that have been obtained in that period have 
been given to the public and scarcely more than one-tenth has 
been given to those whose money is invested in the business. 

THE QUESTION OF REGULATION 

There are some pitfalls into which we may fall. We are 
engaged in a business which can be run on the most successful 
basis (that is, a basis which will give the lowest possible cost to 
the consumer, commensurate with a fair return on the capital 
invested) only as a monopoly business. I would venture to 
say that we cannot expect to enjoy the privileges of running a 
monopoly business, even if that monopoly be to the true in- 
terests of the community in which we operate, unless we are 
willing to carry the burden which must necessarily go with a 
monopoly; viz., the right on the part of the community, whether 
it be represented by local authorities or by the state authorities, 
to regulate the business in which we are engaged. 

It is no new subject for me to deal with in insisting that a 
private monopoly must be accompanied by public control. 
I have preached that doctrine for a number of years, having 
laid it down as one of what I would suggest should be the car- 
dinal principles of our business in an address I delivered before 



GOOD-WILL AS AN ASSET 179 

the National Electric Light Association 1 in this city in 1898. I 
think the sooner we recognize that we are going to be regulated, 
and insist upon the protection that should go with regulation, 
the sooner we will get this question of dealing with the local 
public utilities settled. As Mr. Byllesby has put it, if we ex- 
pose the innermost secrets of our business, we should be pro- 
tected in the enjoyment of a monopoly. In most of our states 
today it is a political question. It should not be a political 
question. And if we use our endeavors to bring about a settle- 
ment of this question, it will cease to be a political question, 
and will get where it belongs , namely, into the class of economic 
questions which will not permit of any politics being in it at all. 
The question of influencing public opinion on this subject 
rests with you gentlemen sitting around the tables here. Those 
of us who direct the policy of large enterprises can do but little 
unless we have the assistance of the men who are operating the 
plants and coming in contact with the public from day to day. 
And I know of no qualification so necessary in our business 
I will put it before engineering ability, or technical skill, 
selling ability, or any other line of business ability as the 
ability to deal in a satisfactory manner with the people with 
whom you come in contact from day to day. 

GREAT QUESTIONS OF THE FUTURE 

If you were engaged in the mercantile business, one of the 
first things you would want to do would be to satisfy your 
customers. And that necessity is far more and far greater in 
our business than it is in the mercantile business. We have to 
deal with the whole community. The feeling of that whole 
community toward your business, if it be good, is a valuable 
asset to your company. The feeling towards your business, 
if it be unfriendly, means disaster to the investment you have 
in your care. 

I think that our future rests very largely with ourselves. 

1. See "Standardization, Cost System of Rates, and Public Control/' 
page 34 et seq. 



180 ADDRESSES OF SAMUEL INSULL 

If we cannot operate our business in a way to earn the respect 
of the community in which we work, there can be but one out- 
come to our business, namely, failure. 

I might go on talking to you for a long time, not only on 
the question of pitfalls, but on the question of the possibil- 
ities of our business. If you were to recall the facts you would 
find that not more than twenty-five years ago there was less 
than $10,000,000 invested in the central-station business, and 
that today there is upwards of $1,250,000,000 invested. The 
possibilities of the next quarter of a century are far greater 
than those of the last quarter of a century. We have nearly 
perfect apparatus. We have relatively cheap money that can 
be obtained for investment in our business. We have low 
operating costs, and we have before us the possibility of produc- 
ing all of the energy required in the communities in which we 
operate. 

A very remarkable address on the possibilities of the central- 
station business was delivered at the last inaugural meeting of 
the Institution of Electrical Engineers in London by Mr. de 
Farranti, the new president of the association, and who was one 
of the pioneers in our business in the development of large 
centers of production and large areas of distribution. Mr. de 
Farranti addressed himself to the question of conservation of 
the fuel resources of Great Britain. The very life-blood of 
Great Britain is its coal supply. The only way that country can 
keep the mastery of the seas is by the preservation of its highly 
economical coal beds. Mr. de Farranti sketched out the plan 
of dividing England, Scotland and Wales into one hundred 
districts, and producing all of the energy required for all kinds 
of purposes lighting, power, heating, and transportation all 
from these hundred centers of production. I have not in mind 
the saving which he said would be effected by the lessening in 
the consumption of coal, but it was somewhat on the lines of the 
reduction that you and ourselves have been able to bring about 
in the consumption of coal in our various plants in the last 
ten years. 

So that to my mind, instead of our field narrowing, it is 



GOOD-WILL AS AN ASSET 181 

going to broaden from year to year. When the great railroad 
systems of the country come to the conclusion that it is time to 
electrify, they should be able to obtain that energy, from the 
shores of Maine to those of California, from the central-station 
plants existing at the time they want to make that change. 
And I might say that that great step in connection with our 
business, viz., the electrification of the steam terminals of the 
country, and possibly later of their main lines, would be in a 
far better position today if the two great transportation com- 
panies centering in New York wliich have electrified their 
terminals had bought their electricity at rates at which you and 
myself and others are very willing to sell energy to the trans- 
portation companies in our particular communities. 



RELATIONS OF THE PUBLIC TO THE 
PUBLIC-SERVICE CORPORATIONS 1 

TO MEET the members of the Chicago Engineers' Club 
is a great pleasure. I take a lively personal interest in 
your profession. Most of whatever success I have made, 
and I might add not a few of the failures I have made, have come 
to me from my connection with the fraternity to which you 
gentlemen belong. A great many of my pleasures, and not a 
few of my worries, have been caused by the engineering pro- 
fession, and therefore it is a pleasure to me to come in close 
contact with you and to talk to you on a subject, which, al- 
though somewhat technical, I can presume to talk upon in 
the presence of engineers. It is an especial pleasure to me, be- 
cause it often happens that when I am talking to engineers I 
can see in their faces the suggestion that it is somewhat pre- 
sumptuous for a layman to talk to them on engineering ques- 
tions or on technical questions. 

Now, as to the relation of the public-service corporation 
with the public. When Mr. Heyworth 2 asked me to address 
you, I hardly knew what branch of the business with which I 
am connected I would like to talk about, and therefore I made 
the subject as broad as possible; and you must excuse me if I 
seem to confine myself to some of the details of the question, 
and not deal with it as a whole. 

The first essential of a public-service corporation in bid- 
ding for success is to give the very best of service at the lowest 
possible price. It matters not whether that public-service 
corporation be a local one, located in a city like Chicago, or 

1. An after-luncheon speech before the Chicago Engineers' Club on Jan- 
uary 24, 1911. 

2. Mr. James O. Heyworth, then president of the club. 

182 



DUTIES OF CITIZENS 183 

whether its business embraces a state or a series of states. If 
a public-service corporation expects to bid for public favor 
and if it does not get public favor it might just as well go out of 
business it must give the very best possible service, with 
the very best possible apparatus, at the lowest possible price, 
considering the price that is to be paid for money in the markets 
of the world and considering also what you have to pay for 
labor and the amount of depreciation on the plant that you are 
dealing with. 

THE BEST SERVICE AT THE LOWEST PRICE 

We have had in this community cases where public-service 
corporations have lost the good opinion of the public, largely 
on account of their failure to give first-class service, that failure 
sometimes being due to conditions over which those public- 
service corporations had little or no control. 

Take the business which it is my privilege to manage in 
this community. We endeavor to give the very best possible 
service we can at the lowest possible price. The public has 
a great deal to do with bringing about this desirable result. If 
the business of the production and sale of electrical energy is 
to be carried to the greatest possible success, that is, its produc- 
tion at the lowest possible cost, with the product sold at the 
lowest possible price having in mind a reasonable profit to the 
investor, that business must be a monopoly business. It is a 
waste either of the money of the investor, or the money of the 
customer, or in some cases the money of the taxpayer, if any 
attempt is made to operate the business other than as a monop- 
oly business. 

That is what I mean when I say that the public has some- 
thing to do with getting the best results in the running of such 
a business as that in which I am engaged. It matters not how 
economical may be our apparatus, how advanced our engineer- 
ing, how good the management of our business, if the public 
decrees through its proper representatives that somebody else 
by the side of us shall deal in precisely that same line of busi- 



184 ADDRESSES OF SAMUEL INSULL 

ness, shall have a duplication of our plant and a duplication 
of our service, the results from an economic point of view must 
be bad. The people who have to pay for it are those who buy 
our product. 

This question of economy of production does not mean 
merely the production of energy for lighting purposes, but 
energy for every purpose that it can be used for in the com- 
munity. It matters not whether it is for transportation 
purposes, for manufacturing purposes, or for the hundred and 
one processes in the industrial life of the community, if you are 
to get the very best possible results, the entire production of a 
given area not necessarily of just one city, but of a given 
area of country should come under one head. 

BOLDLY PREACHING THE DOCTRINE OF MONOPOLY 

In other words, I am here boldly preaching monopoly as an 
economic proposition in a day when our public men look more 
or less askance at the idea of monopoly. And I preach monop- 
oly because it is the only possible way to get the results. It is 
on account of our enjoying a practical monopoly in this com- 
munity that we are able to sell more electricity than is sold in 
any other community in the world; that we have more cus- 
tomers who buy our product than is the case in any other city 
in the world, and that the average price at which we do the 
business is lower than in any large city either on this side or 
the other side of the Atlantic. 

The statements that I have made may seem somewhat 
egotistical; but I think you will find that they are not far- 
fetched, if you will look into the figures with relation to the 
output of electrical energy and prices at which it is sold in the 
various large cities either in this country or abroad. 

In order to do these things we have to have a good deal of 
energy, and before passing into the larger subject of public- 
service corporations as a whole in this community I will give 
you a few of the figures with relation to our own business. 

We have upwards of 125,000 customers. I think that is the 



DUTIES OF CITIZENS 185 

largest number of customers of any company in the electricity 
manufacturing business. Our maximum load this present 
winter has been up to date 275,000 horse-power. Our output 
for this year will be about 25 per cent greater, with a population 
of only two millions and a quarter, than the output of electrical 
energy in the county of London, with a population of more 
than seven millions of people. Our cash investment is 
about $70,000,000. Our business doubles every two and a 
half years. I do not mean to say in money figures, but I 
mean to say in the energy that we put out; about every two and 
a half years our business doubles, whether measured by the 
amount of our maximum load or the amount of our steady, 
daily output. Our coal consumption is upwards of a million 
tons a year, increasing now at a rate in about direct proportion 
to the increase in our output. Our pounds of coal per unit 
sold are about a third of what they were seven or eight years 
ago. That improvement in efficiency does not come entirely 
from the prime movers; it comes partly from our distribution 
efficiency; that is, the higher efficiency of our distribution 
systems. 

DUTIES OF CITIZENS TO PUBLIC-SERVICE INDUSTRIES 

Speaking of a million tons of coal, when you bear in mind 
that that is upwards of ten per cent of the entire soft-coal con- 
sumption in this city, it will give you some idea of the problem 
it is to handle merely the fuel consumed from day to day. It 
it no uncommon thing for upwards of two hundred tons an 
hour to pass over our grate bars during certain hours of the 
day in the winter, and we have to do that to produce the energy 
and yet come within reasonable reach of complying with the 
demands of another engineering body, the Smoke Abatement 
Commission. 

I mention these figures with relation to the business which 
it is my privilege to run to give you some idea of the magnitude 
of the public-service business in a community like Chicago. 
The serious point, to my mind, from the point of view of a 



186 ADDRESSES OF SAMUEL INSULL 

citizen of this community, is not so much the relations of the 
public-service corporations to the public, but the relations of 
the public to the public-service corporations. That, I think, 
is really the most serious situation that exists in this community 
with relation possibly to any local business. 

The cash invested in the local public-service business that 
is, telephone, gas, surface and elevated urban transportation, 
electric light and power, and exclusive of the urban and subur- 
ban transportation of the steam railroads amounts to be- 
tween $450,000,000 and $500,000,000. Just pause a moment 
and think of the stupendous figures. I am not talking secu- 
rities; I am talking money. The estimate given is, I think, 
a fair approximation of the amount invested in all of the local 
public-service businesses in this community, with the exception 
of the large urban and suburban and interurban steam-trans- 
portation businesses connected with Chicago, which of them- 
selves, apart from the trunk-line business of the steam railroads, 
must represent an enormous additional investment. 

The gross earnings of these properties is somewhere be- 
tween $75,000,000 and $80,000,000 a year. 

The expenditures for extensions and improvements during 
the last three or four years have been somewhere between $35,- 
000,000 and $40,000,000 a year, caused somewhat by the ex- 
traordinary expenditures of the two main companies operating 
the surface lines on account of their rehabilitation. But I 
think when you figure the growth of the city and the fact that in 
hardly any department of public service has the point of satura- 
tion been reached, the least possible figure that can be put down 
as that necessary for future development is about $25,000,000 
a year. 

The total number of employees in the local public-service 
businesses of this city, leaving out entirely the steam-railroad 
employees, is nearly 50,000. If you figure five to a family, you 
will find that nearly ten per cent of the population of this large 
city is dependent for its daily bread upon the prosperity of 
the public-service corporations of this community. I there- 
fore say that with these figures before us, considering also the 



DUTIES OF CITIZENS 187 

enormous capital investment employed, the millions expended 
from year to year in improvements and extensions, the tre- 
mendous disbursements in wages (disbursements to labor 
exceeding, probably, the profit which capital receives for 
its money), we may realize that one of the most vital questions, 
one of the most serious questions, to a community like Chicago, 
is its relation with the public-service corporations. It is 
apparent that unless the policy of "live and let live" is de- 
veloped and maintained with reference to the public-service 
business it does not seem an unreasonable statement to make 
that failure of the public-service corporations in this community 
must have a very serious effect upon general business condi- 
tions in this city, and upon the interests of a large portion of 
those who live here in Chicago. 

If you add to the number of employees of the local public- 
service corporations those of the steam railroads centering here 
in Chicago, I think it would be no unreasonable statement to 
say that upwards of twenty per cent of the population of this 
great community is dependent upon local and state and inter- 
state public-service business for a livelihood. 

CLAMOR AND GUESSWORK Do NOT PROMOTE INDUSTRY 

In closing I do not think that I can do better than read a 
quotation from one of the leading articles in the Chicago Record- 
Herald of December 30 last, as a means of impressing upon you 
my point of view with relation to the importance of these great 
industries to this community. The question under discussion 
was regulation of telephones, I think and the writer 
finished his article by saying: 

"To make gas, telephone, water transportation or other 
rates footballs of party or factional politics is to make honest 
government and honest service of the public very difficult, if 
not utterly impossible. Clamor and guesswork may suit 
office seekers, but they do not promote industry, good govern- 
ment, or civic peace and justice." 

In urging on you gentlemen the extreme importance of 



188 ADDRESSES OF SAMUEL INSULL 

the public-service industries to a community like Chicago I 
do not want you to go away with the impression that I do 
not think monopoly industries should be regulated, or that they 
should be allowed to go along in their own sweet way, enjoy- 
ing the privileges of their position, and not accepting any of 
the obligations. I am a strong believer in proper government 
regulation of all such enterprises. I care not whether they be 
local, state, or national. 

But I do not believe that those enterprises should be reg- 
ulated by government as a matter of political expediency. I 
think they should be regulated and governed on a basis of 
what is economically right, what is economically fair, what is 
just to the user, the consumer, and what is just to the man 
who puts up the money, the capitalist. On that basis, I am a 
very strong believer in regulation and control. In fact, I have 
been advocating it in my own line of business now for between 
fifteen and twenty years. When we get to a point that these 
various public businesses, as I say, local, or state, or national, 
are regulated on purely economic lines, you will find that the 
consumer will get more satisfactory service, that he will get 
it at a lower price because money will be cheaper, and that the 
situation will be better all the way around. It is the only 
way that you can really remove these things from politics. 



VALUE OF COMPANY-SECTION ORGANIZA- 
TION IN THE NATIONAL ELECTRIC 
LIGHT ASSOCIATION 1 

IT IS rather to be regretted, I think, that there are not more 
representatives here this afternoon from companies that 
have no company sections. I consider that when Mr. 
H. L. Doherty made the suggestion that we should establish 
these company sections he rendered a great service to the 
industry; that is, not only to the association but also to the 
companies themselves. Naturally, I look at this matter from 
the point of view, to use the expression of this morning, rather 
of the "master" than of the "man," although I try whenever I 
am looking at things from that point of view also to view it from 
the "man's" point of view. 2 I consider that from the com- 
pany's point of view it is one of the most desirable things that 
has been brought into our business. I know of nothing that 
contributes so to esprit de corps in an organization, that results 
in so close a feeling of relationship and loyalty to the organiza- 
tion, as the establishment of these company sections. It is 
much to be regretted that the greater part of the company- 
section membership is confined to five or six of the larger com- 
panies. It is a class of work that can be extended right down 
to the smallest organization, the smallest electric-lighting com- 
pany that has membership in the national organization; and 
I think that if we want this organization of ours to maintain its 
virility we have got to look to the company sections to accom- 
plish that. 

1. Remarks made at the company-section session of the National Elec- 
tric Light Association at the convention in New York on May 30, 1911. 

2. Referring to a paper entitled "Master and Men," by Mr. Paul Luepke, 
of Trenton, N. J., read at the morning session. 

189 



190 ADDRESSES OF SAMUEL INSULL 

I think we should work at some scheme that will get rep- 
resentation of company sections at the national convention. 1 
We tried to do it, indirectly, in Chicago (just as Philadelphia 
has tried to do it by one scheme and another) by bringing some 
of our company-section members here. 

However desirable it may be to have close relationship 
between the company sections and the employees, say, of the 
electrical contractors or allied industries, I am inclined to think 
that it would be a misfortune to the company sections connected 
with the National Electric Light Association to admit the em- 
ployees of those concerns, as the result might be a repetition of 
the unfortunate relationship that originally existed between the 
supply people and the manufacturers in the national organiza- 
tion. What we want to do, and what we want to do just as 
much for the benefit of the employee as for the employer, is to 
bind our people close to us by whatever method we think will 
bring about that result. I know of no method that will bring 
about that result so well as by educating the foreman of the 
linemen and fitting him to occupy an executive position. 
It has been done in the steam-railroad business very extensively, 
so that today I think you will find that the greater part of the 
trunk lines of the country have as their executive heads men 
who have worked in section gangs when they first started in the 
railroad business. There is no reason why we should not bring 
about that same result in our business. I know of no better 
way of doing it than by the encouragement of company sections 
among all of our company members, and I think that the main 
effort of the next administration should be in the same direction 
as the fine efforts made by Mr. Freeman and his fellow officers 
during the last year in encouraging the company-section mem- 
bership. If the work is followed out, we will have a very large 
number of these sections, and they will be of great benefit 
alike to the companies and to their employees. 

While I appreciate that you cannot get men together in a 

1. Mr. Insull's idea was carried out later, at least partially. At the Phila- 
delphia convention of the National Electric Light Association, on June 3, 1914, 
a meeting of company-section delegates was held. The association has now 
(March, 1915) a standing committee on company sections. 



SECTIONAL ORGANIZATION 191 

room, say once a month, who have been hard at work all day 
unless you provide them with some form of entertainment, I 
think there should be some continuity of policy as between the 
executive officers of this organization and the various company 
sections throughout the country. I think there ought to be a 
proper exchange of all classes of information. I do not know 
exactly how it could be worked out most economically, because, 
after all, all these things cost money. While we have a large 
and influential organization and can raise considerable amounts 
of money for special purposes, the regular income of the as- 
sociation is ridiculously low, if you look at it from the point 
of view of the importance of the organization. But there ought 
to be some method of exchanging the ideas, exchanging the 
papers, and insuring continuity of policy. 

A subject that we are all of us vitally interested in, that 
affects our very existence, is our relations with the public. 
We are subject to all kinds of attacks. It has been stated that 
we have, say, about 65,000 employees of the member companies 
of this association. I think that that is a low estimate. I 
think that a fair estimate is nearer 100,000 employees. The 
experience of Brooklyn, New York, Chicago and Philadelphia 
shows that we can count on about 40 per cent of our employees 
becoming members of the company sections. Suppose we have 
100,000 employees in various parts of the country nay, as we 
are reminded by the flags 1 that it is my pleasure to see, they 
are on both sides of the line. What would be the effect on 
public opinion if, say, 40 per cent of that number had a proper 
understanding of the questions governing cost and selling price, 
of the relations of capital and labor, of the relations of the com- 
munity to our business, of the serious effect upon the cost of 
our product to our consumers if we suffer from adverse legisla- 
tion and cannot obtain money at a fair price? Questions 
of that kind could be discussed in our company sections. It 
can be done by the men inside the organization perhaps. Or 

1. The room was decorated with the national colors of both the United 
States and Great Britain. The " line " of the text is, of course, the international 
boundary between the United States and Canada. 



192 ADDRESSES OF SAMUEL INSULL 

there are many men throughout the country who are very glad 
to give their time to enlighten us and our employees on those 
subjects. Again I repeat that it is of vital importance alike to 
the National Electric Light Association and its company mem- 
bers and their employees to push this movement to the greatest 
possible success. 



THE FINAL TEST OF WELFARE WORK 1 

WHILE a number of the members of our association have 
done a great deal in connection with welfare work, it is 
perfectly natural that in a business which has grown in 
a little less than three decades to the enormous proportions 
which the electric-light-and-power industry of today shows our 
attention should have been devoted more especially to matters of 
new invention, improvements in efficiency of apparatus, and im- 
provements in the method of conducting our business. In pass- 
ing it might be well to mention that, notwithstanding all of the 
work we have bestowed on these various subjects, the savings 
accomplished that is, in dollars and cents have in the main 
gone to our customers, the consumers of electricity throughout 
the country, to an extent probably of from 90 to 95 per cent. 

The question of our relations to the public, to the com- 
munities in which we do business the view taken of us by 
those we serve, our customers is a subject to which we have 
given a great deal of attention in the past, and will be forced 
to give a great deal of attention in the future. But I know of no 
subject that will bring us greater return in speaking of greater 
return I am not speaking of the money return I say I know 
of no subject that will bring us greater return than to devote 
our attention to the welfare of those who work under us. 

1. Mr. Insull has been deeply interested in welfare work for many years. 
This subject, with various aspects of public relations, is considered in the 
National Electric Light Association by the public policy committee, which is 
the most influential committee of the association. Mr. Insull has been a mem- 
ber of this committee ever since its organization. He has presented its reports 
at the annual conventions of the association for a number of years. This was 
the case at the brilliant gathering at the New Theater, New York city, on the 
night of May 31, 1911. The report of that year related principally to rela- 
tions between capital and labor. After reading it, Mr. Insull added, on his 
own account, the remarks reported here. See also " Broad Questions of Public 
Policy," page 405. 

193 



194 ADDRESSES OF SAMUEL INSULL 

None of you in this room can fail to appreciate the fact that 
one of the greatest pleasures that can possibly come to men who 
have the responsibility of directing large enterprises is not that 
of merely making money for their stockholders and themselves, 
but the pleasure that comes to them from the opportunities 
they have to do good to their fellows. They want to try to 
leave the world a little better off when they leave it than when 
they came into it. 

While the altruistic side of this work is very inviting, yet 
there is another side to it which we have to consider; namely, 
the financial side. We are engaged in a monopoly business, 
and it has to be operated economically to the best interests of 
the users of our service. We must adopt such methods as will 
enable them to get the service we render for the least possible 
price so as to stand the scrutiny of such regulating body as we 
may be subject to. The regulation of our rates may come in 
the shape of action by a board of aldermen, or it may come in 
the shape of action by a state commission, or it may come in the 
shape of action by legislatures having the power to deal with 
matters, or it may come in the shape of an appeal to the force of 
public opinion on account of the unreasonableness of our rates. 
. All of us, in one form or another, are subject to regulation. 
The real final test of this welfare work will come when we pro- 
pose to include all the various matters, or most of the various 
matters referred to in this report, in the cost of service, and 
consequently the selling price, to our customers. This price 
has to be passed on finally by whatever regulating body it may 
be our particular good fortune to come in contact with. 

I know of no business where continuity of service is of such 
great importance as in the business in which we are engaged. It 
is a business of great capitalization in proportion to the yearly 
return. It is impossible to run it satisfactorily so as to turn 
over the cash capital more than once in five years. There are 
very few instances on either side of the Atlantic where such a 
result has been obtained. The consequence is that our in- 
terest account and our depreciation account are of much 
greater importance than our wage account. What we need in 



WELFARE WORK 195 

order to keep down our interest account and our depreciation 
account is continuous and faithful service. That can be ob- 
tained only by offering some incentive beyond the mere wage 
which every laborer and every man who works with his hands 
or with his brains is entitled to. 

The subjects that we deal with in this report are not our 
subjects merely. We are not alone in this work. Most of the 
great industrial corporations in this country are giving a great 
deal of thought and attention to these matters. As a result 
they are giving substantial aid to the welfare work in connection 
with their employees, largely for the same reasons set forth in 
our report and the reasons I have set forth in my remarks. 

If you will look into the progress of this matter in other 
countries you will find that a great deal is being done in the 
direction of governmental assistance and legislative action. 
Take, for instance, the drastic Employees Liability Act passed 
a year or so ago in England, or the Old-Age Pension bills passed 
in England and Germany, or Compulsory Insurance, with all 
its complex details, now proposed by the British Chancellor of 
the Exchequer. These are examples of a species of govern- 
mental paternalism, certainly with relation to the old-age 
pensions and compulsory insurance, which can hardly find any 
favor in this country. It seems to us of the public policy com- 
mittee that it is far better that such work, in this country at 
least, should be done voluntarily, based upon the mutual 
interest of the consumer, the employee, and the capital in- 
vested. That is the work we are hoping to start here tonight 
among those of you who have not taken the subject up. We do 
not want you to think that it is necessary in every case to carry 
out all the plans suggested in the report. 1 That is not a 
possibility in a great many cases. 

It is to be hoped that every one of you will apply to your 
particular case at least one of these schemes, 2 or some other 

1. The full report is printed in Vol. I of the Proceedings of the National 
Electric Light Association for 1911. 

2. Relating to such subjects as accident insurance, sickness insurance, 
death benefits, service annuities, profit sharing, employees' savings and invest- 
ment funds, and life insurance. 



196 ADDRESSES OF SAMUEL INSULL 

scheme; and if you do it you will improve your relations with 
your employees. I am confident it will improve your relations 
with the public and will add to the stability of the securities of 
the business in which you are engaged. 



THE NECESSITY OF THE APPRAISAL OF 
PUBLIC-UTILITY PROPERTIES 1 

MR. BYLLESBY has dealt with the subject of the 
appraisal of our properties in a very able way from 
what I might call the professional or engineering point 
of view. My connection with such matters is more particularly 
with the financial side of the subject, with the capital side of the 
question. In discussing this subject with members of this 
organization, what impresses me more than anything else is 
how few of the managers of electric-light companies have a 
correct appreciation of the real capital invested in their busi- 
ness, and consequently the value of the property they are 
running. 

Since I have been here this week, one gentleman has asked 
me what I would do in a case where the actual value of the 
property was away below the amount of securities outstanding, 
and it occurred to me to ask him the amount of his income. 
My recollection is he said $140,000 or $160,000 a year, gross. 
I then asked him what his capital was, and he said that the 
bonds which had been issued were away beyond the value of 
the property; the company had issued bonds for $550,000. 
Now it is just as impossible for a man to do $140,000 or $160,000 
of gross business with less than a cash capital of from $700,000 
to $800,000 as it is for me to fly to the moon. 

The best investment that any of you can possibly make is 
to find out where you stand. You are in the habit of taking 
stock of material on hand; now take stock of the property you 
have. Do not attempt to do it yourselves, because you have 

1. Mr. H. M. Byllesby, of Chicago, read a paper on "Breadth of View 
in Public-Utility Appraisals" before the National Electric Light Association 
at the New York convention on June 2, 1911. In discussing this paper Mr. 
Insull spoke as reported here. 

197 



198 ADDRESSES OF SAMUEL INSTILL 

not had the experience that will enable you to form a correct 
conclusion. I am practicing exactly what I preach. If I want 
a valuation of the Commonwealth Edison Company's property, 
I do not go to my engineers and auditors, or to the heads of my 
various departments, but I call in an outside expert, and I 
pay him his fee to tell me exactly the value of the property I 
am operating. 

In dealing with the question of rates, in dealing with your 
relations with the community in which you do business, in 
dealing with your relations with different governmental bodies, 
if you know exactly the value of the concern you are running 
you will find that you can make a trade that will give you a 
satisfactory return on the capital invested. I would like to 
talk on this subject all the afternoon, gentlemen, because I 
cannot say too much to impress you with the necessity of a 
proper appraisal. It is not a cheap operation. You will 
think you are spending money that makes your profit-and-loss 
account for that particular month when you pay the bill look 
very sick; but the very best investment that you can possibly 
make is to find out just where you are. In the great majority 
of cases I would say in almost all of the cases of the prop- 
erties represented in the membership of this organization 
you will find that you have greater values than you have 
thought. Take the case of the gentleman just cited. He 
thinks he is in a very bad hole. He thinks that with an issue 
of $550,000 worth of bonds it is impossible to find $550,000 of 
property, and yet I know, as well as I know that my name is 
Insull, that he has actually between $700,000 and $800,000 of 
property, without valuing the business as a going concern. 



CANADIAN ELECTRIC-SERVICE PROBLEMS 
DISCUSSED ON CORONATION DAY 1 

riS not only a pleasure but a very great privilege to me 
;o be present on this occasion, and to be permitted to ad- 
dress you on so important a day, a day of such consequence 
to all English-speaking people, as the Coronation Day of King 
George V. I had expected to have a little celebration of my own 
on this occasion on a farm on the prairies of Illinois. That my 
arrangements, owing to your kindly offices, should have been 
changed so that I am allowed to spend Coronation Day on 
British soil is an honor that I shall very long remember. 

It is not the privilege of all Englishmen who seek their 
fortunes beyond the sea to follow the "all-red route," or to 
live under that "little rag of red," but wherever tliey may be, 
although owing to the exigencies of business they may live 
under other flags, I think as one of them I can say that they 
never forget the Mother Country. Whatever duty and loyalty 
they may feel to the flag of their adoption, they still have 
(and the older they grow the stronger the sentiment) a great 
pride in the traditions of Britain's past, and in the greatness 
and achievements of herself and her children of the present. 
We have the greatest possible sympathy for her in the time of 
her troubles, and the profoundest belief and confidence in the 
great future that lies before the English-speaking people who 
owe allegiance to the British flag. 

I have been particularly impressed with the character of 
your meetings. Nothing can be of such great benefit to the 
industry in which we are all engaged, nothing can be of such 
great advantage to the Canadian portion of that industry, as 

1. An address delivered at the annual dinner of the Canadian Electrical 
Association in Niagara Falls, Ont., on June 22, 1911. 

199 



200 ADDRESSES OF SAMUEL INSULL 

an association such as yours, with deliberations such as it was 
my pleasure to listen to this morning. For a number of years 
it has been my privilege to take an active part in the affairs of 
the National Electric Light Association, and I would like to 
refer for a few moments to the work of that association, with 
which you have become recently more or less affiliated, and 
tell you some of the things that that association has done for 
the industry on the other side of the Gorge. 1 

BENEFITS OF ASSOCIATION 

In speaking of the subject I want you to bear in mind that 
I am speaking from the point of view of a man responsible for 
the investment of large sums of money in electrical enterprises, 
and therefore as one who is forced to consider whether associa- 
tions of this kind are likely to be of material benefit and of 
financial advantage to the various companies such as you gentle- 
men are connected with. It is my judgment that the work of 
the National Electric Light Association has done more for the 
improvement of the commercial methods and the engineering 
methods of the electrical industry in the United States than 
any other one agency since the early work of the inventors who 
first gave us the various electric-light-and-power systems which 
we are engaged in operating. 

This association has done much in the way of fostering 
pleasant relations between our various member companies and 
the communities in which they do business. It has added very 
largely to the knowledge of our employees, and consequently 
has added very much to their efficiency. We are now engaged 
in endeavoring to introduce schemes among our member 
companies with reference to such things as pensions, savings 
funds, insurance, and the like, for the purpose of adding to 
the material welfare of the employees of the various companies 
which are members of our association. 

The business in which we are engaged has few parallels in 

1. Referring to the international boundary between the United States 
and Canada. 



CANADIAN PROBLEMS 201 

growth in the industrial world. Three decades ago there was 
scarcely more than a few hundred thousand dollars invested 
in this business, and today there is probably $1,750,000,000 
invested in the electric-light-and-power industry in the United 
States and Canada. There are probably employed by the 
various companies from 100,000 to 150,000 men. Notwith- 
standing its remarkable growth, the business has, on the whole, 
paid handsome returns on the capital invested. 

It is a business which is probably less affected by panic 
and industrial depressions, which we must expect from time 
to time, than any other public-service industry. This may be 
partly owing to the fact that we are engaged in a new business, 
and that we have not reached the point of saturation, our ef- 
forts to extend our operations being somewhat sharpened when 
we find periods of depression in general business approaching. 

HYDRO-ELECTRIC AND STEAM PRODUCTION COMPARED 

Being at this location, right in the center of what is popu- 
larly supposed to be the greatest power development on the 
North American continent, naturally one would refer to the 
question of hydro-electric development; but it happens that 
practically my entire experience, with the exception of a few 
isolated cases, has been confined to steam development. Some- 
times I wonder why it is that the public, whether they are in 
Canada or the United States, look upon Niagara as the greatest 
power-production center in this country. My own impression 
is that the greatest power-production center in the United 
States, at the present time, if you include all the various electric- 
light-and-power companies and transportation companies, is 
in the city of New York. With all modesty I may add that 
I think the largest steam-electric power-production center in 
the United States operated by one company is probably that 
of the company of which it is my honor to be the president in 
the city of Chicago. 

There are a number of gentlemen in this room whose business 
is menaced more or less by the hydro-electric development on 



202 ADDRESSES OF SAMUEL INSULL 

the Canadian side of the Niagara River. I want you when you 
go home to figure out what is your investment per kilowatt of 
maximum output and divide that investment into two classes, 
one the generating investment and the other the distribution 
investment. You will find that your average investment 
and I do not think that the proportion is any different in 
Canada from that in the United States in this respect you 
will find your average investment in the distribution system is 
just about five or six times your average investment in your 
generating plant. So when you hear that Niagara power is 
coming into your territory, and that the investment for the 
production of Niagara power is apparently some absurdly 
small sum per kilowatt of maximum output, please remember 
that before that hydraulic development can be used to any 
extent in your community it must be accompanied by exactly 
the same amount of dollars invested in distribution system that 
you have. Your case is by no means so hopeless as would 
appear if you just take the information on the surface the 
apparently correct information and do not go to the bottom 
of the thing. I suppose some might consider that what I am 
about to say is a wild statement to make; but I have thought 
for a good many years past that a steam-generating plant 
located in the city of Buffalo could compete under the conditions 
under which energy is sold in Buffalo, and must be sold, owing 
to the conditions under which business is done, and the con- 
ditions under which people live, and so forth; I have thought 
that such a plant could compete with electrical energy brought 
from one of the water-power plants here at Niagara Falls. 

OPPORTUNITIES FOR YOUNG MEN 

Before I take my seat I want to address a few remarks to 
the young men here. I want to say to the young men attend- 
ing this convention that I know of no business which has so 
great possibilities for advancement and for an honorable career 
as the business that we are engaged in. Some might say that 
it is natural that I should make such a statement because I 



CANADIAN PROBLEMS 203 

know of no other business; but speaking from my own experi- 
ence, and speaking from the experience of a great many young 
men who have grown up with me in this business, a great many 
men who today are looked upon more as the fathers than the 
sons of this industry, I say I know of no business that affords 
greater opportunities for you young men. The positions that 
you can achieve, the advantages that may accrue to you in the 
business, rest entirely with you. You have before you the op- 
portunity to obtain the knowledge to fit yourselves to occupy 
positions of prominence in this industry, and naturally those 
positions must bring with them the advantages and the emolu- 
ments that come with prominence and come with success. It 
is simply a question whether you will rise to the occasion when it 
is afforded to you and whether you will grasp the opportunity 
that is before you. Whether you are in a small country town 
or in a large city you should take advantage of the opportunity 
to gain a knowledge of the business that is right at your hand. 
I know of no better agency to get that knowledge of your day- 
by-day work than by forming a connection with such an asso- 
ciation as yours or the National Electric Light Association. I 
know of no place where you can get better engineering knowl- 
edge, better commercial knowledge, better advice as to what to 
do under all kinds of circumstances, than you can get from the 
National Electric Light Association and its affiliated body, the 
Canadian Electrical Association. 

To those gentlemen here who are responsible for the opera- 
tion of properties I want to say that they cannot spend their 
companies' money to better advantage than by sending their 
young men to meetings of this association, if the meetings are 
of such a character as the one I attended this morning. In 
offering them that advice I am only practicing what I preach, 
and what is practiced by the managers of all the large electrical 
properties of the United States. The only limit as to the 
number of the men that we send to our conventions, and 
the only question that we consider at convention time, is 
how we can get along in our business with such a number of 
men absent. 



204 ADDRESSES OF SAMUEL INSULL 

PUBLIC OPINION CANNOT BE NEGLECTED 

The question of the relations between the public-utility 
operating companies and the communities in which they 
operate has been much discussed in the last few years. The 
old method of doing business was to assume that the public 
utility belonged to a class of overlords that could not possibly 
make a mistake. If the community in which it operated was 
not satisfied with its methods, why the people must just put up 
with those methods just the same. I care not how good may 
be the franchises under which you operate, how long may be 
the grants you have, how able may be the management of 
your property, so far as the engineering side of it is concerned, 
or how good may be your engineer and how perfect your plants, 
unless you can so conduct your business as to get the good will 
of the community in which you are working, you might just 
as well shut up shop and move away. 

This matter of public relations is one that has been brought 
home to a great many industries, not only public-service in- 
dustries, but all classes of industries in the United States in the 
last few years, and I think you people on this side of the line 
might very profitably study what has been going on in con- 
nection with public opinion in the United States, and the rela- 
tion of public opinion to corporate affairs. Most of the troubles 
that have occurred in the United States found their origin in an 
absolute neglect of public opinion in the case of general indus- 
trial corporations and a neglect of local good will on the part of 
the local public-service corporations. 

Having obtained a franchise, if you are men dealing with the 
public from day to day, the first thing you want is the public's 
good will. If you are managers of properties, the first thing 
you want, on the part of your employees, is to see that they do 
everything to get that good will. I do not mean to say that 
you should give way to every whim or caprice, or that you 
should bow to every demand of the politician who is bidding 
for public favor. That is not at all necessary in order to get 
general public good will. You have to remember, as one of 



CANADIAN PROBLEMS 205 

your members stated in a paper this morning, that the com- 
munity is your customer, and you have to put yourselves in 
the position of your customer. 

Suppose one of you went into a store to make a purchase, 
and you wanted some certain article, say an article of apparel, 
of a certain color, say white. What would you think if the 
clerk behind the counter reached up for a roll of goods and 
said, "Well, our rule is you have got to take green." You 
would walk out and go somewhere else. You would buy the 
white article at some other place. There are many things 
that public-utility companies do that are just as absurd as 
that. My last word to you is that above franchises, above all 
question of money making (because customers' good- will will 
help you to make money), above all questions of engineering, 
consider your relations with the community in which you are 
working and in which you have got to live, because your plant 
cannot be picked up and moved away. 



DUPLICATION OF PRODUCTION IS 
ECONOMIC WASTE 1 

WHILE sitting here and listening to my friend Dawes 2 
I began to get very pessimistic about the possibilities. 
But he made one remark that I think should give us 
some hope. He stated that public-service business is recog- 
nized as a monopoly, a regulated monopoly, and that therefore 
we who are engaged in operating public-service industries are 
not subject to attack to the extent of competitive industrial 
organizations; that it is easier for us to get capital to flow into 
our coffers. This is the first time that I ever had a banker tell 
me that. Mr. Dawes went on to say that we have not the 
trouble that ordinarily exists in the large industrial enterprises 
in this country. If he had been in the public-service business 
as long as I have, he would probably recall the fact that some 
twenty years ago the cure offered for all the ills that the public 
suffered from in dealing with public-service corporations was 
competition. That would fix up everything. If the author- 
ities would only grant new franchises, start a new gas com- 
pany, or a new electric-light company, on a competitive basis, 
that would regulate the situation. 

Those of us who are in this room and who were in the 
business, as I was, twenty years ago, will recall the fact that we 
challenged that dogma. We took the position that com- 
petition in public-service business was a waste of capital. 

1. During the annual convention of the American Institute of Electrical 
Engineers for 1911, which was held in Chicago, Mr. H. M. Byllesby gave a 
dinner at the Chicago Club to which many of the prominent engineers attend- 
ing the convention were invited to meet several men of note in Chicago bank- 
ing and business circles. Mr. Insull spoke at this dinner, and this chapter is 
a report of his speech on that occasion. The date was June 29, 1911. 

2. Mr. Charles G. Dawes, president of the Central Trust Company of 
Illinois. 

206 



UTILIZING DIVERSITY 207 

That in addition to its being a waste of capital, it was a charge 
against the consumer, because capital always gets its pay. We 
came out boldly and took that position and we won out. There 
is some hope for the industrial corporations if they will find 
and take the correct position in relation to their business. They 
may win out. 

It is a very great pleasure for me to have had the Institute 
visit Chicago. It has not been my privilege to be here at the 
meetings for the last few days. I was called out of town and 
returned today. But I was very anxious that the members of 
the Institute should have the opportunity to look over the 
business that it is my privilege to be at the head of and to get 
at close quarters with some of the ideas and the principles that 
govern the conduct of that business. 

During the few moments that I intend to address you I 
want to refer to what we have been able to accomplish here 
and the instruments that have helped us towards that ac- 
complishment, referring to the policy that we have been pur- 
suing, as the result of which I think it is a conservative state- 
ment to make and I hope you will not charge me with 
egotism in making it that in this community the greatest 
return on the dollar invested is obtained at the lowest average 
cost to the user that is obtained in any large center of popula- 
tion in the world in the manufacture, distribution and sale of 
electrical energy. 

THE NEW CONCEPTION OF ELECTRICITY SUPPLY 

The introduction of large prime movers, the large generating 
units, led us to conceive the idea that the business of electric- 
lighting-and-power companies is to distribute electricity for 
all the purposes for which electrical energy can be used in the 
community. Not merely to manufacture and distribute the 
energy for use day by day by the retail user of light or the 
retail user of power, we thought. The field we should occupy 
was far larger. We considered that the proper function of 
any public-service company engaged in the manufacture and 
sale of electrical energy is the operation of all the transport^- 



208 ADDRESSES OF SAMUEL INSULL 

tion systems in the city, the turning of all the wheels of industry, 
and later, when the time comes for electrification of the ter- 
minals of the great steam railroads in the country, to provide 
them with the necessary energy to operate their business and 
to a very large extent to distribute it for them. 

Our ideas in the direction of the universal generation and 
distribution of electricity in the community in which we operate 
are quickened by the enjoyment of the use of nearly perfect 
prime movers owing to the introduction of the steam turbine. 
When we started in to dispose of energy to wholesale users we 
were confined to the unit of 5,000 and 6,000 horse-power. 
But the steam turbine has made it possible for us to avail our- 
selves of the large units now in use, running as high as 20,000 
and 25,000 horse-power. Before next winter's load comes we 
shall have operating units up to certainly 30,000 horse-power, 
and I hope that within a very few years hence sizes will be even 
larger than that. 

We realized that there is a diversity factor just as much in 
our business of wholesaling energy as there is in our business of 
retailing energy. The profits of the smallest public-service 
corporation in this country are obtained from the diversity 
factor existing between the users of electricity; that is, between 
one small customer and another. And we conceived the idea 
of massing the production of electricity for large users and reap- 
ing from them a profit for ourselves in supplying them with 
energy, owing to the diversity factor existing between the large 
wholesale business and our general business. 

It is absolutely impossible for a man to be writing at his 
desk at the same time that he is going down in an elevator, or be 
going down in an elevator at the same time that he is returning 
home in the street car or in the steam car; hence the diversity 
in demand. 

How THE AGGREGATE OF SURPLUS ENERGY SHOULD BE 
UTILIZED 

In talking to you gentlemen here, members of the American 
Institute of Electrical Engineers, I want to draw you a picture 



UTILIZING DIVERSITY 209 

of what will come in the future when the time comes for the 
electrification of all the main arteries of travel throughout this 
great country, and when the railroad companies draw their 
energy from the power houses of the existing local companies 
which are now stretched from the Atlantic to the Pacific and 
almost from the Arctic Circle to the Gulf of Mexico. Con- 
sider all the great hydro-electric stations and steam-electric 
stations now in operation and building throughout the country. 
In the aggregate it means enormous amounts of surplus energy 
at our disposal. That energy will be distributed, whether it is 
to the small customer who uses one incandescent lamp or to 
the large railroad system that uses 100,000 or 200,000 horse- 
power and it will be distributed eventually by practically a 
single system of distribution. When that millennium comes, as 
it must come, as it is not only a possibility but an economic 
necessity, when that millennium comes we shall be producing 
and distributing electricity and selling it at the lowest possible 
cost to the greatest possible number of consumers, the lowest 
possible cost to the consumer to be whether he be a large con- 
sumer or whether he be a small one. 

Now take some of the great mistakes, from my point of view, 
that have been made in the electrification in what little 
electrification there has been in connection with our great 
steam-railroad properties. Take the experience of two such 
great institutions at the Pennsylvania Railroad and the New 
York Central Railroad. A few years ago when we had put 
into operation, I think, the first large steam-turbine unit in 
our Fisk Street Station, the New York Central Railroad sent out 
a most distinguished commission of electrical engineers and 
mechanical engineers to look into our methods. What was the 
result? The Pennsylvania Railroad put up its own plant and 
the New York Central Railroad put up its own plant. If 
you will investigate the cost of those plants, and the operating 
cost of those plants, and will charge five per cent depreciation 
and five per cent for money and then figure out the cost of the 
electrical energy that they produce, and compare their cost with 
the contract price paid by the street-railway companies in the 



210 ADDRESSES OF SAMUEL INSULL 

city of Chicago, you will find a difference between the cost to 
those two steam-railroad companies and the cost if they had 
purchased their electricity at the price we are in the habit of 
selling it to any street-railway company wanting it here in 
Chicago you will find a difference in cost, after allowing for 
interest and depreciation, of upwards of $1,000,000 a year. 

RAILROAD MAXIMUM-DEMAND PERIOD FAVORABLE TO CENTRAL- 
STATION OPERATION 

Now that is an economic waste; it is an economic waste not 
only directly to those companies, but indirectly to the elec- 
tricity-supply companies interested in the community where 
that electrification of steam terminals has taken place. The 
advantage of the diversity factor between the two classes of 
business was lost to both the railroad companies and the 
electric-service companies. I have lately been trying to find 
out when the maximum load of the steam railroads centering 
in Chicago probably occurs, and I mention this to elucidate 
my point, on the question of diversity; that is, diversity of de- 
mand. The only information that I have on which to base my 
estimates was to take the gross cash revenue of the railroads and 
its variation from month to month. Based on the gross cash 
revenue I find that the maximum load of the steam railroads 
comes in the month of October in this particular neighbor- 
hood. I have tried to figure out from the same information 
with regard to the load on the steam railroads operating be- 
tween New York and Boston, and based on their receipts I 
find that their maximum business came in midsummer. I am 
not familiar with the steam-railroad business, and that seemed 
somewhat peculiar to me. So I had an interview with Mr. 
Mellen, 1 of the New Haven road, and he told me the figures 
were correct. He said that their maximum load came at 
midsummer. It comes at that time because of the enormous 
amount of passenger business to the resorts along the Eastern 
Coast. 

1. Mr. Charles S. Mellen, then president of the New York, New Haven 
and Hartford Railroad Company. 



UTILIZING DIVERSITY 

If the maximum load of the steam railroads comes in the 
months, say, of June or July, it seems to me a very ridiculous 
proposition to provide the capital necessary to build individual 
generating plants when at that same time all of the cities be- 
tween Boston and Philadelphia, including New York, have in 
the summer a maximum amount of idle generating plants 
which could just as well be employed in taking care of the 
maximum load of the steam railroads. 

UTILIZING THE DIVERSITY FACTOR IN DISTRIBUTING SYSTEMS 

I will go a step further. If what I have said is true (and we 
think we have demonstrated its truthfulness so far as the local 
business of Chicago is concerned, owing to the fact that we have 
been able to take care of our own business and three-fifths of the 
local transportation business of this city and raised our load 
factor from 28 per cent to between 40 and 50 per cent in doing 
it) as to generating plants, surely it must be equally true in 
relation to the distributing systems. And in our distributing 
systems, you engineers know full well, we spend five to six 
dollars where we spend one dollar in generating plants. 

How absurd it would be if, instead of having one vast 
distributing system here in Chicago for our regular electric- 
light-and-power business, we conceived the idea of establishing 
a large number of small distributing systems running out from a 
central point. What would be the amount of copper used? 
What would be the amount of capital needed to buy that cop- 
per? What would be the financial result on the balance sheet? 

Now we today, all of us, pursue exactly that same absurd 
policy, so far as general distribution of electrical energy is 
concerned. I think the best case that I can cite is that of 
New York city, because they happen to have there a few more 
distributing systems than we have here in Chicago. If you 
walk down the street in New York you will find one distributing 
system underground, another distributing system on the sur- 
face and another distributing system on the elevated road, and 
all of them using precisely the same character of electrical 



212 ADDRESSES OF SAMUEL INSULL 

energy all of them able to save an enormous amount of 
money if those three distributing systems were put together, in 
precisely the same way that we tie together the Edison dis- 
tributing systems in any of our large cities. 

By continuing to apply these same ideas to the Chicago 
situation I am rather hopeful of producing and distributing 
electrical energy at the lowest possible price that it can be 
produced and distributed with steam as the prime mover, 
and as a result to surpass the quantity of production and dis- 
tribution in that of any other city from one central-station 
company. The success which we have met with in massing 
the production of energy can, I believe, so far as economy of 
operation and capital saving is concerned, be greatly exceeded 
by massing distribution. 

Fortunately for us, I think we have the opportunity of 
doing that well within our reach owing to the peculiar local 
conditions that have existed in this community with reference 
to our transportation properties. I am having prepared a 
plan for combining all of these primary distributing systems. 
That is, instead of running out separate cables of large capacity, 
capable of carrying current of high potential, first out to the 
Edison substations, then another set out to the elevated-rail- 
way substations, and a third set to the surface lines instead 
of having three separate systems of that character we plan but 
one. Further, the plan contemplates but one set of sub- 
stations. When you distribute from that substation take out 
just the character of current you may require to use for a 
certain class of service. That is, instead of having a separate 
distributing system for 500-volt current on the surface and 
another system on the elevated structure, to have it all one. 

What would be the result of working out such a plan? 
The first result would be to throw out of use an enormous 
amount of copper. Or, in other words, an enormous amount of 
capital. But as we grow with reasonable rapidity in this city 
our engineers found that the idle investment would all come 
back into use again in the course of five years. The estimated 
net result was that after five years a saving of upwards of 



UTILIZING DIVERSITY 213 

$1,250,000 a year would be obtained. This is the equivalent to 
the creation of $25,000,000, capitalizing the saving at five per 
cent. That could be done just by having all these things 
together. 

If that is possible in a city like Chicago, what could be done 
in a city like New York? Our maximum load here at the pres- 
ent time is about 200,000 kilowatts. I suppose, including the 
generating stations of other companies, it would be not over- 
estimating to say that there is a maximum of 300,000 kilowatts 
of electrical energy produced in central-station generating 
plants in this city. I do not know the amount produced in 
New York. I presume it is nearly three times that, if you take 
the entire area of the present city of New York. If by putting 
all these things together, doing what we certainly ought to do 
if my estimates are correct, we had but one generating and dis- 
tributing system in New York if we could create values from 
savings in Chicago, which, capitalized, amount to $25,000,000 
what would be the value that could be created in New York 
by following the same methods of engineering? 

MASSING PRODUCTION AND DISTRIBUTION WHAT IT MEANS 

I think the most important subject that you gentlemen 
can engage in is the energy-manufacturing and energy-dis- 
tributing side of electrical engineering. Following up that 
subject will lead to a far greater conservation of resources than 
all the talk we are hearing with reference to shutting down the 
water-powers and stopping the working of the forests in the 
western country. This subject points to a saving which, if 
you will take the whole country, would be represented by figures 
that are so stupendous that a man would seem to be crazy 
if he simply guessed at them. I know of nothing that can lead 
to a greater enlargement of our business than following out the 
idea of massing production and massing distribution. 

It is a common thing for us to read in the daily newspapers 
of the great trouble experienced in providing money to finance 
the extensions and improvements in the steam-railroad enter- 



214 ADDRESSES OF SAMUEL INSULL 

prises in this country. Even main trunk lines, with prime 
credit, find their operations curtailed by the great difficulty of 
getting the necessary capital. They will be confronted, within 
a comparatively short time, whether the men in charge know 
it or not, with compulsory electrification. We offer them a 
helping hand; we offer to do our part in raising the capital 
necessary for that electrification and for dealing with that side 
of the business, namely, the production and distribution of the 
electrical energy needed a branch of the business which the 
steam railroads little understand. However great may be their 
talent in railroad management, however much they may know 
as to the conduct of the transportation business, which business 
is a specialized business just as much as our business is a 
specialized business, they can afford to come to us for help. 
If the electrical engineers of this country will take up this sub- 
ject in a proper way and will come and study what little we have 
been able to accomplish here locally in Chicago and what it 
leads to and what it means, they will find it means a future 
to our business that none of us have ever dreamed of. 



DINNER IN HONOR OF MESSRS. S. Z. DE 

FERRANTI, C. H. MERZ, AND ARTHUR 

WRIGHT, OF LONDON 1 

MR. INSTILL: Gentlemen, I deem it a great privilege 
to have the opportunity of introducing to you to 
some of you and to recall to others of you the 
acquaintance of my good friends and fellow-countrymen, 
Mr. S. Z. de Ferranti, Mr. C. H. Merz, Mr. Arthur Wright, and 
their fellow- visitors, Mr. V. L. Raven, Mr. E. Thompson, and 
Mr. H. A. Couves. 

It is somewhat difficult to get up here and introduce to 
you Mr. de Ferranti as an Englishman. He is more of an 
American than I am. His grandmother was born in Pough- 
keepsie, and came of good old Dutch stock. His ancestry on 
the other side comes from that part of Europe that is very 

1. On September 28, 1911, on the eve of their return voyage, Mr. Instill 
gave a complimentary dinner at Delmonico's, New York, in honor of several 
distinguished English electrical engineers who had been visiting electrical 
points of interest in the United States. A stenographic report of the speeches 
at that dinner is presented. Reference to the work of several of the guests of 
the evening is given in the text. It may be added, perhaps, that Mr. de Fer- 
ranti is a past-president of the (British) Institution of Electrical Engineers 
and that his ideas in relation to transforming all the energy obtained from coal 
into electricity have been set forth at length in a presidential address before 
that body. Mr. de Ferranti is one of five honorary members of the American 
Institute of Electrical Engineers, and one of two (Yearbook of 1915) credited 
to Great Britain. Mr. Charles H. Merz is a consulting engineer of London 
and Newcastle-upon-Tyne. Jointly with Mr. Frederick Sargent, of Chicago, 
he designed the addition to the Fisk Street generating station of the Common- 
wealth Edison Company, of Chicago, put in operation in 1914. One of the 
generating units in this addition is a 25,000-kilowatt Parsons turbo-generator 
the largest imported generating unit in the United States, both the steam tur- 
bine and the generator having been built in Newcastle-upon-Tyne, England. 
The name of Mr. Arthur Wright is perpetuated in the Wright demand system 
of charging. The speeches made at this dinner and the list of the names of 
the guests, following the report, are given here with the thought that, with the 
passage of the years, they may prove of historical interest. 

215 



216 THE DEFERRANTI DINNER 

much in evidence this evening in connection with some little 
disturbances with our old friend the Turk. 1 But it is a very 
great pleasure for me to introduce him here, when I remember 
the great work that he has accomplished in connection with the 
industry with which most of us around this table are connected. 

REMARKABLE EARLY ENGINEERING WORK OF FERRANTI 

While Boston was building its direct-current station at 
Atlantic Avenue, while Chicago was building its first bipolar- 
dynamo station on Adams Street, and while the New York 
Edison Company was engaged in putting in, I think, some of the 
early marine type of direct-current units, Mr. de Ferranti was 
designing in London what, from the engineering point of view, 
is practically our present-day modern system of generation. 
The machines that he put into the Deptford station, and which 
ran I think 11,000 or 12,000 volts, of a rating, I believe the 
first two of them of about 1,200 kilowatts, and the conductors 
that he made to transmit current from Deptford to the West 
End of London represented practically the same engineering 
scheme that we have today. 

It is a very remarkable thing that he should have foreseen 
what is the absolute essential of central-station generation and 
distribution so many years ahead of the time when the energy 
consumption was of such a quantity as to justify that class of 
engineering. I have often said at similar gatherings that I 
consider Mr. Edison's conception of the necessity of the high- 
resistance filament in multiple and the marvelous description in 
his early distribution patents stamped him as a great engineer. 
I do not think the statement is far-fetched if I say that the con- 
ception of the necessities of our business worked out by Mr. 
de Ferranti when he was practically but a boy, only a year or 
two after he reached manhood, entitles him to very high rank 
as an engineer in that same class. 

So that when we over here are pluming ourselves on our 
great engineering skill, our wonderful conception of the engineer- 

1. Referring to the war between Italy and Turkey then in progress. 



THE DEFERRANTI DINNER 217 

ing necessities of our business, we should go back a quarter of 
a century and see what was accomplished in England at that 
time to study the first example of what so many of our engineers 
think was really born in this country. 

VALUE OF THE WRIGHT DEMAND SYSTEM 

In addition to the engineering side of our business, we 
learned another very important thing from that same little 
isle. Take the work of our friend, Mr. Arthur Wright. I do 
not think it is any exaggeration to say that Mr. Wright first 
taught us how to sell electricity. I think that the work which 
he did in Brighton was the first daylight which we received as 
to how electrical energy should be sold. I do not care whether 
it is in the homes of the rich, in cities like New York, where 
they can pay a high price for electricity and not miss the money, 
or in a city like Chicago, where we have to depend largely 
upon the ordinary flat dweller who can only afford to pay $12 
or $18 a year. It makes no difference whether we are selling 
to large consumers, such as we happen to be fortunate enough 
to have in Chicago, and they would like to have in New York, 
who buy anywhere from 10,000 to 50,000 kilowatts, or whether 
it is the product of a hydro-electric plant, from which energy is 
sold to large distributors. In all cases the fundamental basis 
of all the contracts made, provided these contracts are made 
with the idea of making money by them the fundamental 
basis on which the current is sold under all these conditions is 
what is known as the Wright demand system of selling energy. 
We have to thank our friend, Mr. Arthur Wright, for teaching 
us the A B C of the selling of electricity. 

Some years ago when we in Chicago were struggling with the 
problem of selling electrical energy to the railway companies, 
there was a great diversity of opinion in the organization of 
which it is my privilege to be the head, as to how to do it. Some 
of my people about that time were going over to the other side 
to work hard, as they told me; to have a good time, as I 
thought and it happened that they strayed into a commit- 



218 THE DEFERRANTI DINNER 

tee room of the House of Lords. The committeemen were 
considering the question whether the houses of Parliament 
should grant certain rights relating to the wholesaling of 
electricity in the metropolitan area of London. Unfortunately 
for some friends of mine and myself the scheme did not go 
through Parliament. But the money that the stockholders 
of the exploiting company subscribed for the purpose of trying 
to get that bill through Parliament served one very good purpose 
about 4,000 miles west of where that committee of the House of 
Lords was meeting. 

MR. MERZ AS A PIONEER IN SELLING ELECTRICITY 
AT WHOLESALE 

The evidence given before the committee of the House 
of Lords on the Administrative County of London Bill taught 
my people that there was money in selling electrical energy 
at around one cent a kilowatt-hour in the city of Chicago. 
I have sometimes thought if the directors of the Commonwealth 
Edison Company had done their duty they would have reim- 
bursed me for the money I lost in that particular enterprise! 

The evidence given before that committee was prepared 
by my friend Mr. Charles H. Merz and his staff, and those 
companies which are engaged in selling electricity on a large 
scale in this country to large users owe more to the work of 
Mr. Merz in that direction than to any other one man, in my 
judgment. 

You can well understand, gentlemen, therefore, what a 
pleasure it is and what a privilege it is to me to make you 
all acquainted with these gentlemen and their fellow-travelers, 
and the pride that I naturally have as an Englishman in feeling, 
in knowing, that such large contributions in the direction of 
the commercialization, the real commercial success of the busi- 
ness that we are all engaged in, can be traced to the efforts of 
some of my fellow-countrymen. 

We have advantages here; we have greater possibilities; 
probably our people have greater purchasing capacity; we 



THE DEFERRANTI DINNER 219 

have more rapid development here, and we have far more 
rapid increase in population. In this country we are able to 
take advantage, in a way that they are not in England, of the 
conditions, and we are able to make far more money out of our 
business than the English operators are able to do; but that 
should not prevent our recognizing that a great deal of what we 
do and what we have been able to accomplish we can trace to the 
study and experiments and efforts of the electrical engineering 
profession of Great Britain more especially, and also to the 
professional engineering of Europe. 

Gentlemen, before calling upon Mr. de Ferranti to speak, I 
want to drink to the health of the guest of the evening and his 
associates, and then we will ask Mr. de Ferranti to talk to us. 
Here's to Mr. de Ferranti and his associates! 

REMARKS OF MR. S. Z. DE FERRANTI 

I feel it a very great privilege to be among such a gathering 
as I see around me this evening and to be able to say a few 
words to you on a subject that we are all so much interested 
in. First, however, I must take the opportunity of thanking 
our host very much indeed for the kind words that he has 
said about my fellow-engineers, who are over here with me, 
and about myself. What he has said is part of the overflowing 
generosity and kindness that we have met with on every side 
in this country. I have been, of course, immensely impressed 
with your great engineering work, but this has not impressed 
me so much as the very kind reception, the very great goodness, 
we have received at the hands of everybody we have come 
across. Everyone has tried to do everything possible to make 
our stay here really enjoyable. In fact, if I might go a little 
further, I almost would like to say that I feel that "I have come 
home." 

You know how very greatly I am interested in the matter of 
electrical development, in the larger uses of electricity, in fact 
in what I shall call the universal application of electricity to 
almost all purposes. I believe in this because I believe it is a 



220 THE DEFERRANTI DINNER 

great means of making savings, of conserving our natural 
resources. I believe that electricity is the greatest labor saver 
that has ever been invented. I believe it is only commencing 
to secure that saving which it will eventually do when it comes 
into its own. 

The saving of our material resources is also another very 
great matter. We are throwing away and wasting untold 
wealth at the present time, because we have not yet got to the 
point of understanding our work sufficiently, or seeing far 
enough into the future, to see that we can do any better than 
we do today. On those lines electricity will develop and pro- 
gress to an enormous extent; but it is not on those lines that 
electricity came to be used and that electrical engineering 
work was started upon. 

The first real commercial application of electricity, I sup- 
pose, was the electric telegraph. That was not really to take 
the place of anything. It was not to displace the small engine 
in the works by means of an electric motor which did its work 
better. It was to fill an entirely new field, to give us means 
of communication which had not been dreamt of before. That 
was perhaps the first great application of electricity. 

We then had a large industry in electroplating, which I 
think in order came along next. That, although it gave us 
entirely new articles, and an entirely new trade, to a certain 
extent took the place of an existing commodity; namely, what 
was known originally as Sheffield plate, and which is now an 
almost forgotten thing. 

Then we come along, I suppose, to the first applications of 
the electric light, which was almost something in the nature of 
a scientific wonder. It gave a lot of brilliancy that had never 
been known before. It was naturally expensive and difficult 
to produce with batteries, but quite a new thing in develop- 
ment. Then came the idea of electric light from central-station 
supply. Of course, you know the various stages things have 
gone through in electrical matters, and you will see that they 
have been characterized partly by supplying an altogether new 
field that was not touched before, and partly by replacing some 



THE DEFERRANTI DINNER 

existing system, some existing style of filling our wants which 
was already in operation. 

Take two cases of that. We have only to think of the 
telephone and its immense development. That was entirely 
a new thing. In a sense it did away with telegraphing a bit, 
but really that is a small part of its utility. It was an entirely 
new field that was filled by the telephone. On the other hand, 
take the case of the electric light as you know it today. As it 
was introduced many years ago, in incandescent lighting, when 
it came in it competed with oil lamps and gas supply. 

Well, that is how electricity has gone on from stage to 
stage, until we have got to the present time. 

USING COAL BY THE ELECTRIC ROUTE 

It does not require much persuasion to realize the immense 
expense of the electrical industry, the size of the business, the 
immense amount of money invested in a great sphere of use- 
fulness, in the number of your wants that are supplied by it; 
but, notwithstanding all that, it is only a very small thing, when 
you consider what the possibilities of electricity are. Really, 
if you carry it to its ultimate end, when it is sufficiently far 
developed, you will see every bit of coal that we now use for 
power, light and heat, and electro-chemical work you will 
see, surely, when our knowledge is sufficiently advanced, all 
these things must be done by the medium of electricity. That 
is to say, where it is a question of coal, we will burn our coal 
into electricity, and by that round-about process do more 
economically all the different things we are doing in a more 
direct way today by coal. 

I went into the figures, so far as they relate to England, and 
so far as I could see there was not one per cent of the coal which 
was being raised from the mines that was being turned into 
electricity in England. Suppose, say, you are twice as well off 
in the way of electrical work. I do not think that is so, but 
in relation to the coal consumption in this country, suppose you 
are twice as well off, and that two per cent of the coal mined 



222 THE DEFERRANTI DINNER 

in this country today is being turned into electricity for the 
general uses to which electricity is put. Just think of that in 
relation to the 98 per cent which ought to be turned into elec- 
tricity, and which will be turned into electricity, when you 
gentlemen have evolved the means of doing it. 

I do not think that is in any sense a fantastic idea. I say it 
in all seriousness, and before such a meeting as this, that I 
thoroughly believe I am quite convinced that the time 
will come when for all purposes it will pay to use coal by the 
electric route. 

I will not enlarge on what it will mean. You gentlemen 
represent very great and important undertakings. I do not 
know what the size of your industry will be when my ideas are 
realized, but it will be something very big. Now, just see for a 
moment what it would mean if we could do all our work electri- 
cally, and let us see what are the conditions that would have to 
be created to bring that about. In the first place, to make such 
a thing possible you must be able to turn a much larger per- 
centage of the heat energy of the coal into electrical energy. 
I think that goes without saying. I do not imagine that we 
have got to go such a very long stretch forward before we will 
get such a return of the heat energy of the coal in the form of 
electricity as will warrant our using the coal by electric means 
for practically all purposes. 

That is the first thing. The second, of course, is one which 
can come only with time and practice. That is, the perfecting 
and cheapening of all the means of transmission and transforma- 
tion. By transformation I mean the transformation of the 
electrical energy into the final result, whether it is heating, 
whether it is steel, or some chemical product, or whatever it is 
that coal is used for today. These things have got to be im- 
proved, and the capital costs have got to be much reduced, 
possibly by direct improvements of all the apparatus used and 
partly by the much greater scale of operation. Surely, when 
that state of affairs comes about, when you get across the critical 
point in the amount of electricity you can get from your coal, 
and when you can carry out the applications with certainty, 



THE DEFERRANTI DINNER 223 

and success, and sufficiently reasonable price, then I feel sure 
that this general electrification will gradually become the order 
of the day. 

GREAT SAVINGS TO BE EFFECTED 

What are the results that we can hope to follow from such 
state of affairs? I am not ashamed to speak of them, too, this 
evening, because, as I say, I do not think that these things are 
visions of the future only. I think they are very much nearer 
than we can readily imagine. To begin with, I am sure such a 
state of affairs would save a large amount of the coal we now 
use. Of course, there is always an increase going on, and we 
always want more coal; but taking it at any one time, I believe 
one might reasonably hope for a saving of probably half the 
coal which we now use. There is the first great point in the 
conserving of the natural resources of any of the civilized 
countries. Secondly, you get back to a thing which follows 
from the better use of the coal. 

Part of such a process as I have sketched out to you would 
mean burning the coal in such a way, or using it in such a way, 
that you would not throw away the valuable by-products that 
are contained in it, and which we know today quite well we 
can get at, and which we do get at, but which it does not 
generally pay us to extract or utilize. The great thing, as you 
know, in the coal is the fixed nitrogen, of which we get a com- 
paratively small percentage today. If we were to get anything 
like a reasonable return in using the coal of the fixed nitrogen 
in the coal, we should then have the means in any country such 
as this in other countries, no doubt, but especially in such a 
country as this of maintaining our lands fertile notwithstand- 
ing the continual use of those lands, and without any diminu- 
tion in their value as producers of agricultural products. 

At present there is a great depletion of the land; its value 
is being sapped I do not say by unscientific work, but owing 
to the fact of lands being plenty and there being plenty more 
within reach, so that our food supplies can be brought from 
this newer land, and so the old land is being neglected, the 



224 THE DEFERRANTI DINNER 

older part of the country is becoming less fertile, and this is 
going on while we are throwing away our means, ample means, 
of keeping it as fertile and as good as the first day it was used. 
That follows as a part of the process which it would be nec- 
essary to bring about for a universal use of electricity. 

The last point is the immense labor-saving character of 
electricity. If you are required to mine about half the coal, 
there would be a very large saving in labor, which could be 
turned to another account. There are great difficulties, of 
course, in transferring labor from one industry to another, and 
there is much difficulty in getting men to adapt themselves to 
new situations, but still everything saved is so much to the good, 
on the basis of enriching the country and making it more pros- 
perous, and that must, in its turn, react on the whole popula- 
tion of the country. 

The first great saving would be in the reduction of the 
mining work necessary to accomplish our results. The next 
thing is in burning the coal, in transmitting the coal into 
energy. I am not speaking so much of hauling it long distances 
to the centers of population, or in distributing it, or getting it 
to the consumer, but I refer to the actual burning of the coal in 
furnaces. In this operation you get the damage done to these 
furnaces; there is the trouble of clearing up the mess generally 
that is produced there and in the cities by the burning of coal. 
All that represents a large amount of labor. We all know 
it; it is perfectly apparent to us, and we are doing all we can 
to prevent it we are electrifying more and more but just 
think what the conditions would be when the scheme I have 
outlined is all complete. Of course, you know of what great 
savings have been made in the application of electricity up to 
this time, in the way of motive power and all the other things 
which it has been applied to. There, again, you will come in 
for further labor saving. 

A GREAT RESULT TO LOOK FORWARD To 

I must apologize, almost, for talking to such an audience on 
such a subject, because I have not been able to tell you any- 



THE DEFERRANTI DINNER 225 

thing new; I have not been able to tell you anything that you 
did not know before; but I have ventured to take your time to 
remind you of some existing things, and the things which may 
be developed in the future, and to point out to you the direc- 
tion in which I hope you will work to bring about the results 
indicated. Personally, I am not ashamed to present these 
things to you, and I feel perfectly confident of what I say. The 
thing I cannot tell you is the time when these things will be 
realized. If I could do it, it would be very useful. I cannot 
say quite when this result will come about, but it will come 
about, and will come about as a result of such work as you 
gentlemen here this evening are doing in developing the elec- 
trical industry from the point of manufacturing machinery, per- 
fecting apparatus, bringing electricity to the door of the con- 
sumer, and instructing him how to use it most economically. 
It will come by the work of all of you, not by any one inven- 
tion but by the result of general progress, the progress which 
must take place when a number of earnest and skilful men con- 
centrate their endeavors in bringing about a result. 

It is a thing I like to look forward to with joy and pleasure. 
Electricity has been my life work and hobby, my greatest 
delight, and I have no doubt your work in electrical matters 
has taken the same form with most of you. Gentlemen, I hope 
the result I speak to you about will be brought about by your 
efforts within a reasonable time. 

MR. INSULL: Gentlemen, the picture Mr. de Ferranti 
has drawn of the possibilities of the generating stations and 
distribution systems of this country is somewhat at fault 
from one point of view, and that is he has not indicated to us 
how we are to provide the necessary capital for such develop- 
ments. I suppose it is within reason to say that our business 
that is, entirely new developments; I do not mean re-finan- 
cing, but extensions to our plants to enable us to take care of 
business offered requires somewhere between $100,000,000 
and $150,000,000 a year, according to the conditions of the 
business. If any such development takes place within our 



226 THE DEFERRANTI DINNER 

time as Mr. de Ferranti speaks of, it is almost impossible to 
think of the amount of money that will be needed to take care 
of the business that would be offered to us. Under these 
circumstances, it is very natural for us to look for a banker, and 
I have great pleasure in calling upon my friend Mr. Frank A. 
Vanderlip, president of the National City Bank of New York 
City, to give us some light on how we can do it. 

REMARKS OF MR. FRANK A. VANDERLIP 

I felt a good deal out of place in this company of technical 
experts when I first came in, but as the guest of the evening and 
I were "reminiscing," I found that in the same year, when we 
were both boys, just the same age, we each built a dynamo; 
we each had great ambitions to go into the electrical field. We 
each built a small dynamo and we ran one arc light each. Now, 
our guest went on, but I was not able to do so, in that field; 
but recalling these early ambitions has certainly given me a 
great fellow feeling for the work you are all doing here, and 
for the great work that he has done. 

During the conversation that I have had with Mr. de 
Ferranti I have been greatly interested in the story he has told 
me of the handicap that electrical development has labored 
under in England the handicap of the public attitude to- 
wards the municipal ownership of the plants there. He has 
labored in a field that is nothing like the field that you have 
enjoyed, because of that attitude of the public. 

Now, if he has been observing something of the political 
and business conditions here, as he has the technical condi- 
tions, he has found us in the midst of a most distressing situa- 
tion a situation wherein the very foundations of our in- 
dustrial conditions are disturbed, because of the public attitude 
toward industries, because of the public attitude toward 
monopolies, and of this public desire to cure evils, which the 
public believe exists, by force of competition. 

I think the field of electrical development, perhaps, is 
rather happily situated in regard to the very disturbing con- 



THE DEFERRANTI DINNER 227 

ditions that other fields of industry are now laboring under. 
We all pretty well recognize the necessity for monopoly in the 
electric-light industry. It is a recognition of that feature that 
has enabled us to make very considerable strides in making 
popular in a financial way investments in electrical enterprises. 
For a good while, after the first great expenditures of capital 
were made, capitalists looked with a good deal of disfavor upon 
investments of this character. They do still. I am told that 
in England they look upon them with decided disfavor. 

We are only beginning in a few cases to create electrical 
securities so that they really command the respect of most 
conservative investors. That was necessarily so in the way 
that we have developed. There are several thousand individual 
electrical companies operating in this country, I think, and 
they have raised a great sum of money. But when they began 
to unite themselves they presented a broader field of investment, 
so that the investor does not feel that it is necessary for him to 
have technical knowledge in regard to the conduct of the 
particular business, and this really greatly broadened the field 
for conservative investment in electrical properties. 

INVESTORS REQUIRE STABILITY 

Mr. de Ferranti has said that present methods of utilizing 
the energy latent in the coal are to be very much improved. 
That sort of thing rather frightens the capitalist, after he has 
seen the scrapping of electric machines in a very few years, after 
they have been in service but a short time. He has seen the 
danger of competition coming in with newer forms of machinery, 
endangering old investments, and this work which you are 
all doing to get nearer to the point of efficiency, while it is 
absolutely necessary, must be vitalized by the confidence of 
capital. There must be a feeling on the part of the investor 
that there is a certain stability in the investment. 

That stability stands not only on the technical excellence 
of the work which you do, but it stands, too, on the attitude 
of the public towards your big institutions. We have a ten- 



228 THE DEFERRANTI DINNER 

dency now toward public-service commissions, toward a 
greater control, and on the whole I believe that development is 
on the side of stability, if it does not go too far. It has, in 
some ways, gone too far in most of the prominent instances 
where it is exercised, but it has also brought great advantages, 
the advantages of recognized monopoly. It is no longer so 
easy to have "strike corporations" come into the field and en- 
danger old investments. 

You have before you a work that is just as important as 
any technical work which you are doing the work of satisfying 
the public that you are being fair, that you are giving the public 
a square deal and the sort of a square deal that the public de- 
mands. I believe if you will give that square deal, that you 
are going to get, on the whole, fair treatment. You will not 
always get it, because the interests of the public are in the hands 
of men frequently not well trained, not with a full knowledge 
of what is fair. But I believe you have got as important 
work on that side as you have on the technical side, in giving 
fair treatment to the public, so as to insure fair treatment in 
return, and unless capital feels certain of that fair treatment, 
the day which our guest looks forward to is going to be long 
deferred, because of the lack of the vitalizing influence of this 
great amount of capital which may be slow in presenting itself 
unless the conditions are attractive. 

MR. INSTILL: There is such an accumulation of talent, 
electrical talent, scientific talent, that we have around this 
table, that it is rather a dangerous thing to call upon any par- 
ticular guest as a scientist; but there is one man for whom we 
all have great admiration, and many of us have great affection, 
and that is my friend Dr. Charles P. Steinmetz. 

REMARKS OF DR. CHARLES P. STEINMETZ 

Electrical engineers of the English-speaking nations on 
both sides of the Atlantic : I have been delighted to meet Mr. 
de Ferranti, personally, the first time on this occasion, although 



THE DEFERRANTI DINNER 229 

I knew him by reputation as long as I have been an electrical 
engineer; in fact, a good deal longer because, while I was 
studying the rudiments of electrical engineering, I was reading 
of the grea*t work he had done in England. I was very much 
surprised to find him relatively such a young man one whom 
I always regarded as one of the early pioneers who had in those 
bygone ages done the work we are just beginning to do now; 
that is, to build the electrical generator of thousands of horse- 
power, and to transmit electrical energy up to 10,000 volts 
in underground cables. I recall in those days that I read in 
prominent electrical papers of instruments that would measure 
as much electric current as is used to run an arc lamp. 

Well, gentlemen, in the days which have elapsed since the 
twenty or more years ago when this early work was done by 
our friend Mr. de Ferranti, we have carried the work in this 
country much farther. We are not measuring our stations 
any more by thousands of kilowatts; we measure them by hun- 
dreds of megohms. We are running underground cables for 
distances of hundred of miles, with voltages higher than 10,- 
000 volts, although I do not question that some of my friends 
around the table here who have high-voltage underground 
cables wish that their cable record was the same as that of the 
old Ferranti cable of more than twenty years ago, which is 
carrying 10,000 volts today. 

VALUE OF DE FERRANTI'S EARLY WORK 

But if we have carried the work farther we have done 
what all good pupils do when they leave their teacher's school; 
they apply what they have learned. When they have a chance, 
as in a new undeveloped country, with great opportunities, 
they may apply it on a larger scale than their teachers have done, 
but they stand on the work of their teachers, of the pioneers 
who have done the work, and to a very much larger extent 
than most of us realize now. 

There, in the old station, de Ferranti transmitted alternating 
current at 10,000 volts with underground cables to do the work 



230 THE DEFERRANTI DINNER 

of the city of London at that time. There, too, many phenom- 
ena were studied and recognized and controlled which have 
become familiar to a few of us only during the last few years, 
and remind us of the Ferranti effect the rise of voltage along 
the cable, from the generator onward, by the leading current, 
the charging current of the cable. I remind you of the phenom- 
enon which we have gradually learned to control, which is that 
the breaking down of the insulation is not the result of the 
voltage of the static field only, but of the searing effect at the 
edge of the static field. Now we bevel the rim of the cable. 
That is an old effect, observed long ago. I remind you that, 
where we protect our system by aluminum arresters, by the 
most powerful protective devices, it was de Ferranti in bygone 
ages who discovered and developed this method of protection. 
So most of the prominent work which we now utilize to protect 
our systems dates back to our teacher's work during those 
days when we knew very little about electrical engineering. 

We have done these things on a larger scale than was 
feasible or dreamed of in those early days; but after all we 
must recognize that the work of the world today is not yet 
done by electric power; it is done by steam power, and only 
a very small proportion of the wheels of industry are run by 
electrical energy. There is a vast field which we still have to 
conquer and which we shall conquer. It is true, at present, 
when we use coal to produce electric power we get only a small 
percentage of the energy of coal back as electrical energy, one- 
tenth, or perhaps one-fifth of it. We may some time in the 
future improve that; but if only one-tenth or one-fifth of the 
energy of coal is given to us as electrical energy, then, gentle- 
men, reversing that process, we should get from electrical 
energy five or more times as much energy as heat, for every- 
thing is reversible. 

In producing light we use electrical energy very largely. 
We find it is more efficient than the direct use of the chemical 
energy of combustion, because we can control it better; we can 
escape the losses by diffusing the light-giving material in the 
vacuum of an incandescent lamp; and to produce electrical 



THE DEFERRANTI DINNER 231 

energy for producing heat we are not limited by being obliged to 
provide a supply of air to carry away a large part of the heat as 
in the case of combustion. There we can use the same remedy, 
and can also reduce the loss to a small fraction of what is in- 
herent in the coal burned, by limiting the access of air, by 
bringing up the vacuum and by other means. You see by our 
present relatively low efficiency of production of electrical en- 
ergy from the energy of coal, we could produce, economically, 
heat from it, and will do it much sooner than we think. 

WILL ELECTRICAL ENERGY RUN THE WORLD? 

So there is a vast field for electrical energy broader 
fields which we are not considering to a large extent. Some 
time in the future our coal mines will be exhausted. Then 
electrical energy will be the only thing which can keep the wheels 
of industry running, or transmit the power of the waterfall, of 
the rivers, the tides. Some time in the future, the fertility of our 
lands will be exhausted. Land has already ceased to be fertile 
in many parts of the country, like our eastern states. To some 
extent then we shall have to rely on electrical energy to restore 
the fertility, to produce fertility. It is being done now, com- 
mercially, under very favorable conditions. 

With the advance of engineering, many of the things which 
are not thought of at the present time as being within the field 
of the application of electricity will come into view. But then, 
all these developments which are in the future, we hope in the 
near future, have, as Mr. Vanderlip explained to you, to depend 
on the financial side also. In that direction we can look to our 
pioneers, men like Mr. Wright, who have shown us that it is 
not merely the strictly technical side of distribution of electric 
power which must be considered, but that there is another 
side, the side of selling. It is Mr. Wright, our guest, who is 
the originator of the theory of the cost of electric power, who 
has shown us its relation to load factor, diversity factor, and 
demand. We now apply Mr. Wright's system, as Mr. Insull 
has shown and told us, with extreme success. And in this 



232 THE DEFERRANTI DINNER 

manner, you see, we are advancing because of the benefits 
which we have derived from the work of the pioneers, our guests 
here tonight, who honor us by their presence. We have profited 
by the labors of these gentlemen, and I hope we will all see the 
accomplishment of the prediction of Mr. de Ferranti, where you 
really will be able to see electrical energy running the world. 

MR. INSULL: It was not my intention, in inviting you 
here this evening, to have any considerable number of speeches. 
We have reached the end of our speech-making, but before 
dispersing, I am sure you all join with me in wishing our guests 
a safe return home and in expressing the hope that we shall have 
the pleasure of seeing them again in this country at a very early 
date. 1 

1. There were forty-six guests at this dinner. Following is a list of the 

names of the gentlemen present, alphabetically arranged, the occupational 

titles given being as of 1911: 

Anson W. Burchard, Schenectady, N. Y., assistant to president General 
Electric Company. 

H. A. Couves, Newcastle-upon-Tyne, England, engineer Newcastle-upon-Tyne 
Electric Supply Company. 

Francis B. Crocker, Crocker- Wheeler Company, Ampere, N. J. 

Charles G. Curtis, New York, N. Y., engineer, inventor of Curtis turbine. 

Henry L. Doherty, New York, N. Y., president Henry L. Doherty and Company. 

Alex Dow, Detroit, Mich., first vice-president and general manager Detroit 
Edison Company. 

Charles L. Edgar, Boston, Mass., president Edison Electric Illuminating Com- 
pany of Boston. 

William C. L. Eglin, Philadelphia, Pa., electrical engineer Philadelphia Electric 
Company. 

William L. R. Emmet, Schenectady, N. Y., engineer General Electric Com- 
pany. 

Louis A. Ferguson, Chicago, 111., second vice-president Commonwealth Edison 
Company. 

S. Z. de Ferranti, Grindleford, Sheffield, England. 

Weldon W. Freeman, Brooklyn, N. Y., second vice-president and general 
manager Edison Electric Illuminating Company of Brooklyn. 

John F. Gilchrist, Chicago, 111., assistant to the president Commonwealth 
Edison Company. 

John H. Gulick, Chicago, 111., auditor Commonwealth Edison Company. 

John W. Howell, Harrison, N. J., engineer General Electric Company. 

Charles R. Huntley, Buffalo, N. Y., president and general manager Buffalo 
General Electric Company. 

Samuel Insull, Chicago, 111., president Commonwealth Edison Company. 

George J. Jackson, New York, N. Y., vice-president National Conduit and 
Cable Company. 

Professor Dugald C. Jackson, Boston, Mass., Massachusetts Institute of Tech- 
nology. 



THE DEFEKRANTI DINNER 233 

John W. Lieb, Jr., New York, N. Y., associate general manager New York 
Edison Company. 

Herbert Lloyd, Philadelphia, Pa., president Electric Storage Battery Company. 

Jesse R. Lovejoy, Schenectady, N. Y., vice-president General Electric Company. 

Robert Mather, New York, N. Y., chairman board of directors Westinghouse 
Electric and Manufacturing Company. 

Joseph B. McCall, Philadelphia, Pa., president Philadelphia Electric Company. 

James H. McGraw, New York, N. Y., president McGraw Publishing Company. 

James R. McKee, New York, N. Y., chairman sales committee General Electric 
Company. 

Samuel McRoberts, New York, N. Y., vice-president National City Bank. 

Charles H. Merz, London, England, consulting engineer. 

Sidney Z. Mitchell, New York, N. Y., president Electric Bond and Share 
Company. 

Thomas E. Murray, New York, N. Y., general manager New York Edison 
Company. 

Loyall A. Osborne, Pittsburgh, Pa., vice-president Westinghouse Electric and 
Manufacturing Company. 

Charles W. Price, New York, N. Y., president Electrical Review Publishing 
Company. 

Professor M. I. Pupin, New York, N. Y., Columbia University. 

J. R. Raven, mechanical engineer Northeastern Railway of England. 

E. Wilbur Rice, Jr., Schenectady, N. Y., vice-president General Electric 
Company. 

Edward P. Russell, Chicago, 111., Messrs. Russell, Brewster and Company 
(bankers). 

Frederick Sargent, Chicago, 111., consulting engineer (Messrs. Sargent and 
Lundy). 

Professor Charles F. Scott, New Haven, Conn., Yale University. 

Henry G. Stott, New York, N. Y., superintendent motive power Interborough 
Rapid Transit Company. 

Frank J. Sprague, New York, N. Y., consulting engineer. 

Charles P. Steinmetz, Schenectady, N. Y., consulting engineer General Elec- 
tric Company. 

R. Thompson, assistant mechanical engineer Northeastern Railway of England. 

Frank A. Vanderlip, New York, N. Y., president National City Bank. 

Herbert A. Wagner, Baltimore, Md., vice-president Consolidated Gas, Elec- 
tric Light and Power Company. 

Schuyler S. Wheeler, Ampere, N. J., president Crocker-Wheeler Company. 

Arthur Williams, New York, N. Y., general inspector New York Edison Com- 
pany. 

Arthur Wright, London, England, consulting engineer. 



OPPORTUNITY FOR ADVANCEMENT 1 

ON THE last occasion, about a year ago, when I had the 
pleasure of addressing you, 2 1 told you that I hoped that 
during the year now closing you would be able to double 
your membership. You have had the good fortune to go away 
beyond that, so that now you have about 60 per cent of the 
possible eligibles in membership in this association. 

I think that this body is becoming symbolic of our company 
organization. Naturally our board of directors looks to the 
executive officers for the general management and direction of 
affairs; but it would be impossible for those officers to attain 
the success that has rewarded the efforts of the Commonwealth 
Edison Company if it were not for the loyal assistance of the 
various committees in the organization and the concentration 
of intellect that these committees bring to bear on the various 
problems which naturally arise in an enterprise as large as 
ours and in an industry as young. 

After all, this body is but a continuation of that same idea. 
The opportunities that the members of the Commonwealth 
Edison Company Section have of acquiring information must 
necessarily aid them in their duties to the company for which 
we all work, and in a larger sense the opportunties to exchange 
ideas at the annual convention of the National Electric Light 
Association must follow all the way down the line, and assist 
every member company of that organization and every member 
of every company section of that organization. 

I shall not be satisfied myself with this Commonwealth 
Edison Company Section until the day comes when every man 

1. Speech at the annual meeting and dinner of the Commonwealth Edison 
Company Section of the National Electric Light Association on November 
1, 1911. 

2. See "Employees Urged to Study Economic Questions," page 161. 

234 



EMPLOYEES' OPPORTUNITIES 235 

in the company's organization who is eligible for membership 
actually joins the section. In fact, I think the day may come 
when membership will be viewed by the officers of the company 
as the first evidence of a man's desire to improve himself, and 
consequently improve his usefulness to the company, and as a 
result improve his usefulness to himself, or, in other words, 
improve his earning power for his own benefit. 

On previous occasions I have referred to the benefits coming 
to members of this section. If you take the Proceedings of the 
National Electric Light Association's convention alone, they 
form today from year to year practically the textbooks of our 
business, as they deal w r ith every branch of the industry, 
whether it be commercial or technical. They afford to every 
young man who aspires to prominence and to position in the 
great industry in which we are all engaged the opportunity, in 
connection with his experience from day to day in his own work, 
to get the necessary knowledge to fit him for the higher posi- 
tions, which, instead of decreasing in number, are greatly 
increasing in number, as the importance of our business in- 
creases, and as our operations grow on a greater scale every year. 

FROM OFFICE BOY TO VICE-PRESIDENT 

It always affords me very great pleasure to address my own 
people. I like to feel that I am one of them. As the years haye 
rolled by and as the business has grown greater and larger, it is 
impossible for me to have that close, personal familiarity with 
all the people around me that I used to have in the early days 
of the development of the business. But it is a very great 
pleasure to me, as I approach the close of twenty years of 
service in the Edison company, to look around and see some 
of the older men growing gray and older with myself. I 
hope and I know that they have no less enthusiasm than they 
had when it was my privilege first to take charge of this great 
business. 

I can look back still further here and see around me friends 
and co-workers of almost thirty years ago. It is a very great 



236 ADDRESSES OF SAMUEL INSULL 

pleasure to see them, and to see that as I have been fortunate 
enough to advance in this business that we have engaged in, 
so they also have been able to advance. 

You may say that, in speaking on the subject of personal 
opportunity and advancement, I am talking on possibly a 
hackneyed subject, but I mention it because I want to em- 
phasize my experience and the experience of those who have 
grown relatively old (we all started young and we still like to 
feel that we are young in a way) . I mention it for the encour- 
agement, as I have said to you before, of the younger men 
around me. There are just as great opportunities in this busi- 
ness today as were offered to the young man starting as an 
office boy in the old Adams Street building years ago and who 
this year has been placed in the highest position of honor that 
is in the gift of this great industry; namely, president of the 
National Electric Light Association. 1 There is no reason what- 
ever why many of you in this room, relatively young, relatively 
occupying minor and obscure positions in the company's 
service, with really far greater opportunity for success than 
that afforded to Mr. Gilchrist there is no reason why you 
should not succeed as he has succeeded, and reach the goal 
which he has reached. 



GREAT OPPORTUNITIES OFFERED 

There are a few things necessary beyond ordinary intelli- 
gence and fidelity to the service you are engaged in. They are 
ambition, "sticktoitiveness," plenty of hard work and taking 
hard knocks. Do not look at those hard knocks from the 
position of the under dog, but look at them from the same view- 
point that the schoolboy looks at them, that the junior in 
college looks at them; that they are part of the training to 
make you resourceful, self-reliant men. If you do that, if you 
take advantage of the great opportunities afforded by an or- 

1. Referring to Mr. John F. Gilchrist, vice-president of the Common- 
wealth Edison Company (1915), and in 1911 president of the National Electric 
Light Association. 



EMPLOYEES' OPPORTUNITIES 237 

ganization like this, your prospects are just as bright and the 
possibilities of success twenty years hence are just as great as 
the success being met with today by the principal officers in 
our company organization. As I have said, they had far less 
opportunity, far less chance of the emoluments that success 
brings, than is opened to those like yourselves engaged in an 
industry into which the capital of the country flows so much 
easier today than it did twenty years ago, or fifteen years ago, 
or ten years ago. 

There is another point that I would like to refer to, and that 
is the great influence of the National Electric Light Association 
in the direction of the personal welfare of its members, and the 
personal welfare of the employees of its member companies. 
I refer to the great work that has been done in the last two or 
three years by the public policy committee of the National 
Electric Light Association, working on such subjects as savings 
funds, pensions and the like. 

These are all subjects that you are vitally interested in, 
and the amount of time given by some of the great financial 
leaders in the electrical industry in connection with the work 
of the public policy committee was referred to quite at length 
in the last convention in New York. The conferences that 
have taken place on the subject of the welfare of the men in the 
service in the last few years have led a number of the member 
companies, including the Commonwealth Edison Company, to 
take up such subjects as, for instance, the savings fund. 

At the present time, if my memory serves me correctly, 
you people in this room as I suppose that the Employees' 
Savings Fund members are composed largely of the men in 
this room have invested in the company's securities upwards 
of $110,000, and that investment is going on at the rate of 
upwards of $5,000 a month, so that probably by the time the 
first five-year term is up, when the time comes for the first 
division of money or securities, as each depositor may elect, 
the chances are that we shall probably have upwards of half 
a million of dollars of our employees' money invested in our 
business. 



238 ADDRESSES OF SAMUEL INSULL 

EMPLOYEES URGED TO INVEST IN THE BUSINESS 

Now, there are only 70 per cent of the men who are eligible 
for that employees' fund who save money from month to month 
by depositing with the fund. The chances are that if we had 
all of those who are eligible, the amount at the end of five years 
would probably exceed $750,000. 

I want to urge you, next to your duty to yourselves in equip- 
ping yourselves for the higher positions in the business, to 
provide for a rainy day, to use your influence among your 
fellow-workers, so that they will provide for a rainy day. In 
urging you to do this, I am urging you to take a course that is 
peculiarly beneficial to yourselves, and one, if you consider it 
carefully, that you will realize is not only a benefit to you but a 
benefit to those who are dependent on you, who are family 
connections of yours, as nothing can so help a man to take a 
proper view of affairs in times of trouble as to feel that he is 
supported by a respectable bank account. I know of no better 
way for you to save your money than to invest it in the busi- 
ness in which you are engaged. If that business has the 
stability to justify you to spend your time in its service, surely 
that business should recommend itself to you as one in which 
you should invest your money. 

I am particularly anxious to see the largest possible owner- 
ship in the company for which we work held by our people 
who contribute toward the results achieved by the enterprise; 
and it is for that reason that I refer almost on every occasion 
when I have the privilege of addressing you to the subject of 
the savings fund. 

The board of directors of the Commonwealth Edison Com- 
pany is now engaged in another effort somewhat in the same 
direction but of a more permanent character, and possibly of 
more permanent value to the employees of the company; 
namely, a pension fund. We hope to get in operation at an 
early date a scheme that will reward steady, constant attention 
to work in performance of service, and enable a man, in ad- 
dition to his own efforts in the direction of saving, to look 



EMPLOYEES' OPPORTUNITIES 239 

forward to having a competence in old age as the result of the 
service that he has rendered to the corporation. 

Now, we are very much given to looking back over the last 
ten or fifteen or twenty years, to "reminisce" on the wonderful 
progress that the electric-light-and-power industry has made. 
But to my mind, when I speak of the opportunities of the 
future, I think that the progress so far made is but a very small 
part of the development that must ultimately take place in all 
the great industrial centers and the territory surrounding those 
centers. 

We have tried to do something in that direction here in 
the city of Chicago. It has been the privilege of the Com- 
monwealth Edison Company to have a great opportunity to 
show what could be done in the way of massing production and 
distribution of electrical energy, and reducing its cost as a 
result, giving cheap electricity to the smallest customer and 
the largest corporation. 

I firmly believe that what we have achieved so far in that 
direction is but a start in the ultimate results that will be achieved 
either by us, or by somebody who follows us, in the production 
and distribution of energy for all kinds of purposes, domestic, 
commercial, industrial and transportation. And as to the last, 
that transportation may be urban, interburban, or even inter- 
state. 

The lessons that we draw from the work that we have so far 
done show most clearly that the production and distribution of 
energy in this great country will be concentrated. Certainly 
where density of population has reached at all a high point, 
say, from the Atlantic seaboard to the Mississippi, the work 
that we have done in the direction of massing production shows 
most clearly that the wheels of industry, whether they be on the 
permanent way of a trunk-line railroad, or in some great hotel 
building like the one we are in, 1 will be turned by the production 
of energy at a relatively few central points. 

To me, the outlook is as bright as it has ever been. The 
possibilities are greater than they have ever been, and to you 

1. Hotel Sherman, Chicago. 



240 ADDRESSES OF SAMUEL INSULL 

whose average years may be half my age will be given the 
opportunity to see the possibilities brought to actualities. 

I simply appeal to you to do your part so that you will be 
fitted to occupy positions that are prominent, and get the reward 
that comes to constant and intelligent service. 



CAREERS OF TWO ELECTRICAL MEN 1 

fTT^HERE is a great deal to be gotten out of our business 
beyond the mere humdrum of work. There is nothing 
to my mind more elevating, whether it be to the old 
journeyman in the business or to the young apprentice, than to 
meet together, to listen to the experiences of those who have 
had, perhaps, better opportunities, or who on account of their 
age have managed to achieve greater distinction in the business, 
and to get from the remarks and the presence of men like Mr. 
Byllesby the inspiration that should lead all of us to greater 
successes in the business in which we are engaged. 

It is rather a remarkable thing that we have here in Chicago 
two men, one especially prominent in the engineering side of 
our business, and the other especially prominent in the financial 
side of the electrical business. Both of them started on their 
business careers at about the same time one of them after 
he had left one of the universities of Pennsylvania (I believe 
Lehigh University, although I am not sure), and the other after 
a beginning in the "old country." I refer to Mr. Byllesby and 
Mr. Sargent. Mr. Byllesby was a draftsman at the Wetherell- 
Corliss Engine Works in Chester, Pennsylvania. He left 
those works to enter the service of the Edison Electric Light 
Company of New York in the spring of 1881, where I first 
met him. 

Mr. Frederick Sargent took the position at the Wetherell 
Engine Works vacated by Mr. Byllesby; and when Mr. Byllesby 
left the service of the Edison Electric Light Company to go 

1. Mr. Henry M. Byllesby addressed the Commonwealth Edison Corn- 
any Section of the National Electric Light Association on December 5, 1911, 
his subject being "Public Utilities and Progress." Mr. Insull introduced him 
to the audience, the greater part of the prefatory speech being reproduced 
here. This extract puts the author in a new light, that of a biographer-in-brief . 

241 



ADDRESSES OF SAMUEL INSULL 

further afield in the electrical industry, Mr. Sargent left the 
Wetherell works and took the position vacated by Mr. Byllesby 
in New York. Now as they have reached the middle course in 
life, becoming better known in their business and achieving 
greater distinction, one, Mr. Sargent, is at the head of his pro- 
fession, the electrical engineering profession, in this community, 
and the designer of our wonderfully economical central power 
stations, and the other, Mr. Byllesby, is one of the leaders in 
the Central West in the financing of electrical industries. 

I mention the cases of these two gentlemen as examples 
to the members of the section, of what can be done. They 
started equipped, one with the ordinary collegiate education 
that a graduate gets in this country at our universities; the 
other with the shop experience gained in one of the great works 
around Glasgow in Scotland. Without any influence, without 
anything back of them except their own ability and persever- 
ance they have achieved distinction in the two branches of the 
same business which they adopted. I think what they have 
accomplished should be an inspiration to all of you, and with 
that thought to leave with you, I will conclude and introduce 
to you my friend Mr. H. M. Byllesby. 



A CERTAIN HOSTILITY TO PUBLIC- 
SERVICE CORPORATIONS 1 

WHEN you asked me to speak on the subject of "Pub- 
lic-Service Corporations," I naturally assumed that 
you referred to local public-service corporations, and 
I felt some hesitancy in talking upon the subject, because in a 
way I am touting my own wares. But the public service, 
whether it be in the hands of private capital or whether in the 
hands of the municipality, is, after all, one of the most important 
subjects that we can discuss. 

In this city practically all the public services, all the utilities 
with the exception of water supply and sewage disposal, are 
in the hands of private capital. We are fortunate enough to be 
in the position where we probably have less "water" in that 
capital than in any large metropolitan city that I know of on 
either side of the Atlantic. 

There is about $450,000,000 to $475,000,000 invested in 
public services (outside of the services run by the city) in this 
community. The gross revenue paid by the citizens is some- 
where between $75,000,000 and $80,000,000. If you count a 
man at his office and a man at his home as two individuals 
the chances are that the public services of communication, of 
illumination and energy deal with at least 750,000 customers. 
And if you include the transportation on surface and elevated 
lines, they deal with 1,000,000,000 additional customers a year. 

The public services pay to the city and county and state, 
either in the form of taxes or in the form of compensation, an 
amount equal to 12.5 per cent of the entire expenses of the 
municipality, the county, the parks and the Sanitary District. 

Thus the institution of public service in this community is 

1. Speech before the Commercial Club of Chicago on December 9, 1911. 

243 



244 ADDRESSES OF SAMUEL INSULL 

of vital importance to every citizen. The utilities are owned to 
the extent of somewhere between 60 and 70 per cent by the 
people of this community or the people of this commonwealth. 
Whenever a blow is struck at these properties it is struck at the 
people themselves, because if they are not the owners of the 
property, they are the customers of the property; and any blow 
that is struck must lead to increased expense of operation, and 
in the final analysis the customer is the man who has to pay the 
bill, as capital invariably gets it wage, just as labor invariably 
gets its wage. 

Now, what is the attitude of the community toward the 
public service? I think that is best illustrated by the attitude 
of our press. I have only to refer to the great change that has 
taken place in the attitude of the press with relation to indus- 
trial combinations since the decision of the Supreme Court 1 
showed the people of this country that there were two sides 
to the subject of industrial combination. 

Immediately after the decision of the Supreme Court many 
individuals began to talk of the necessity of constructive 
legislation. Following that the serious newspapers of the coun- 
try began to talk of the necessity of constructive legislation. 
One of the principal speakers on that subject in this community, 
Mr. Baker, 2 has referred to the necessity of constructive legisla- 
tion tonight. 

"FRIENDLY HOSTILITY" 

If you will take the attitude of the press toward our local 
public-service corporations, you will find that it is one if I 
may use the term of friendly hostility ; and I think that this 
reflects the feeling of the community. 

I will give you one or two personal instances. I remember 
some years ago the rates of our company were being regulated. 

1. Referring, probably, to the decision of the United States Supreme 
Court in the "Standard Oil case" (Standard Oil Company of New Jersey v. 
United States, 221 U. S. Rep., 1). 

2. Mr. Alfred L. Baker, a citizen of Chicago who has manifested much 
interest in plans for civic betterment. 



HOSTILITY TO CORPORATIONS 245 

One of the self-constituted bodies which thinks its principal 
business (and probably rightly so) and the most serious function 
that it can perform is to assert all the authority and none of the 
responsibility of municipal government this organization 
requested me to appear before it and justify our rates. I had 
such a good time that I asked to be elected a member of that 
body, and I was "turned down." Why? Because I am a 
public-service-corporation official. That shows the attitude 
toward public-service corporations. 

I think it was last spring that we had quite a municipal 
campaign here. As is usually the case when a subscription 
list is going around, I was asked to subscribe, I think, to both 
sides of that campaign. I subscribed to one, and after the 
campaign was over, my money was returned. Why? Because 
I am a public-service-corporation official. I think that shows 
the general attitude of the community toward public service. 

If you will trace that down, I am inclined to think it is 
largely owing to the general hostility that used to exist in the 
community toward corporations. It was largely centered on 
the railroads and the local public-service corporations. That 
has grown less as the shoe has pinched a little harder, and some 
of our friends in the industrial world have come more or less 
in contact with the government, whether it is state or interstate 
or local. 

CHEAP MONEY MEANS Low RATES 

It strikes me that the place where a movement to correct 
matters of this kind should be started is in a club of this kind. 
From the figures I have mentioned you must see the importance 
of the public service to a community like Chicago. If the 
hostility to the public service results in its being difficult for 
the various corporations operating the several branches of 
public service to obtain money, it means that the cost of service 
must be higher. If you have a strong agitation against your 
gas company ; if you have an unseemly controversy such as we 
have seen for the last year in this community with reference to 
the telephone company; if you have matters of this kind treated 



246 ADDRESSES OF SAMUEL INSTILL 

as questions of politics, where the interest of the man attacking 
the industry is largely that of tearing it down with the idea of 
building himself up, it matters not how brilliant may be the 
inventions brought into use, you will of necessity have very 
high cost of service because, after all, the cost of money is the 
largest item of expense in figuring the cost of any public utility 
in any community. 

That is a matter which rests entirely with the community. 
If you want low cost of service, if you want to get the largest 
amount of service in transportation out of a nickel, if you want 
to get the largest amount of energy out of the dollar, if you 
want to get the cheapest and best communication out of the 
money invested by the telephone company, you must put those 
various services in condition to obtain their money in the 
markets of the world at the lowest possible price; and that you 
can only do by judicious regulation and by fostering those 
industries instead of fighting them. 

THE QUESTION OF " HOME-RULE" REGULATION 

It is on this subject that I want to appeal to the members 
of the Commercial Club especially. There has never been a 
time since the early days of civilization that brains have not 
been in control. While we are subject, and universally sub- 
ject, to law, we are subject to a system of regulation here that 
is an absurdity. But there is no reason, if the influence of 
bodies like the Commercial Club is exerted in the right direc- 
tion if they will consider corporate property as sacred as 
the property of the individual there is no reason whatever 
why you should not have the cheapest service in this community, 
because to my mind you have the greatest opportunity. 

To go to the subject of regulation, the question of "home 
rule" in this community has been ridden to death. Some years 
ago some distinguished uplifting friends of mine, went down 
to Springfield and put the control of the principal public- 
service bodies in Chicago under the control of the City Council. 

I am not speaking against regulation and control. I was 



HOSTILITY TO CORPORATIONS 247 

one of the first men in my line of business to recognize, some 
fifteen years ago, the futility and the destructiveness to capital 
and the destructiveness to cheap service, of competition as a 
means of regulation, and urged my brethren in the public- 
service business throughout the country to support govern- 
mental regulation. 

How are these industries regulated here ? They are regu- 
lated in campaigns for the election of aldermen to the City Coun- 
cil, when you come down to the finality of the thing. It is not 
a question of a man's ability to deal with the technical sub- 
jects that come before him; it is a question on the one side 
of a man being able to deliver the greatest number of speeches 
to get the greatest number of votes, and, on the other side, of 
proclaiming that he is the only honest man in the community. 
It is this class of men who regulate $450,000,000 of capital, 60 
to 70 per cent of which is owned right in this community and 
commonwealth, whose business is vital to the success of the 
community, and whose constant flow of money into this com- 
munity in the way of additional investment from year to year 
is a very important factor in the industrial enterprise of the 
city of Chicago. 

PROBLEMS THAT SHOULD BE DEALT WITH IN A BUSINESS-LIKE 

MANNER 

Notwithstanding the situation here, notwithstanding the 
troubles that exist, we have been able to accomplish some 
things. We have heard at different times a great deal about 
conservation, appealing to the imagination by talking of making 
two blades of grass grow where one grows at present. But 
while the cry for conservation has been going on, we have 
managed in this community to get along with half a pound 
of coal in our electric generating stations where we used to get 
along with a pound. If we were using the same amount of fuel 
today that we were using ten years ago, it would make a differ- 
ence yearly of 1,500,000 tons being taken out of the existing 
coal supply of Illinois. 



248 ADDRESSES OF SAMUEL INSULL 

I am naturally more familiar with my particular branch 
of the business than I am with the other branches of public 
service, and I simply mention the fact of increased fuel economy 
merely to illustrate my position. The same class of improve- 
ment has gone on from year to year in every other branch of 
public service. 

There are few cities in this country where you can ride as 
far for five cents as you can at the present time in this city, 
and if the municipal officials of this city are seriously anxious 
to obtain still further concession in that direction, there will 
be no trouble whatever to get them within the next few months, 
if they will leave politics out of it and simply deal with the 
question as a business proposition. 

The influence of the members of this club in that direction, 
to see that things are dealt with in a business-like manner, to 
see that the public service is protected and fostered just as 
much as you would protect and foster any other branch of 
usefulness in this community, will, I am sure, greatly add to 
the prosperity of Chicago and to the benefit of its citizens. 



THE NAME OF EDISON A TALISMAN 1 

IT IS an especial pleasure to me, apart from the pleasure of 
again addressing my associates in connection with the 
business of H. M. Byllesby & Company, to rise and thank 
you on Mr. Edison's behalf for this magnificent audience, an 
audience of appreciation of his visit on the occasion of the 
tenth anniversary of H. M. Byllesby & Company. 

I need only mention the fact that when you came in here 
this evening I had to explain to him that the splendor of this 
banquet and the large attendance of so many of the prominent 
men in this community were tributes to him and to his great 
work. I tell you this to give you an illustration of the mar- 
velous modesty of the man whom I consider the greatest private 
citizen of the race today. 

To talk of his achievements I certainly can do that in 
his presence, for he cannot hear what I am saying I have 
simply to point to the striking fact that much of his work 
has been in the direction of recording and reproducing the ut- 
terances of the human voice, whether mechanically or elec- 
trically, and it stands as a proof of a marvelous capacity for 
work on the part of a man who found it most difficult to hear 
the results of his own experiments. 

His achievements, whether we take one particular branch 
of the electrical industry, in which one or the other of the men 
bearing these names you see around this room have been con- 
spicuous, or whether we run the whole gamut from the early 

1. Thomas A. Edison was a guest of honor at a banquet given by H. M. 
Byllesby & Company at the Congress Hotel, Chicago, on January 5, 1912. The 
dinner followed the third convention of the organization. Mr. Byllesby, the 
toastmaster, proposed a toast to Mr. Edison, which was drunk standing and 
with great enthusiasm. Mr. Edison does not make public speeches, and Mr. 
Insull responded for him on this as he has on other occasions. 

249 



250 ADDRESSES OF SAMUEL INSULL 

days of telegraphic invention to the modern-day work the 
inventions in connection with the production and distribution 
of electrical energy have surpassed in practically every 
branch the work of any one man in any particular branch. 

WHAT EDISON'S WORK MEANS TO THE WORLD 

It is nearly forty years since Mr. William Orton, the presi- 
dent of the Western Union Telegraph Company, stated that the 
result of the invention by Edison of his quadruplex system was 
to create in one year, a year in the early seventies, phantom 
circuits, the value of which, had those circuits (of poles and 
wires) been erected along the highways and byways of the coun- 
try, would have represented in that year an expenditure of 
$2,000,000, and I think in the next year $3,000,000. 

I simply mention this to show you that lon'g before many of 
you younger men were born, Mr. Edison had done enough work 
to place his name securely in the niche of fame, and at that time, 
practically as a lad (he was twenty-six years old) he had scarely 
commenced his career and his work. Now as a man of sixty- 
five he works with the same enthusiasm, the same devotion 
and the same ambition to achieve, that signalized his efforts in 
the early days of electrical experimentation. 

I think in no part of this world to which the efforts of modern 
industrialism have pushed themselves will you find a country 
where the name of Edison is not a household word. 

But it is not my intention to dwell long upon the praise of his 
achievements. There is only one other branch of his work that 
I wish to refer to, and that is the marvelous work that he did in 
connection with the generation and distribution of electrical 
energy and the development and establishment of what we to- 
day call the incandescent-lighting system. 

It is not possible for any of you engineers in this room, 
whether you may be engaged in electrical illumination, in 
laying out the steam or electrical distribution of a factory, 
in the building of an urban or interurban, or interstate system 
of transportation I say it is not possible for you to lay out 



THE NAME OF EDISON 251 

engineering plans in which you make use of Edison's original 
distribution ideas, as set forth in his early patents and his 
various systems (which are the best practice today and which 
will be used, in the judgment of all of us, for all time in connec- 
tion with the distribution of electrical energy), without rec- 
ognizing the marvelous engineering ability of the man. This 
is not merely the ability of a haphazard investigator or inventor, 
but the marvelous engineering ability that led the great 
originator, over thirty years before many of the things were 
put in use, to place in the records of the United States Patent 
Office the very specifications which you yourselves are com- 
pelled to use in this year of grace 1912. 

As I told you, I prepared no set speech for this occasion. 
And sitting here beside him this evening, sitting here beside 
our old chief and friend, I have asked him to give me a few ideas 
that I might read to you. 

SOME OF EDISON'S APHORISMS 

Edison says: "It will not be many years before the public 
will hardly know what coal is. Its use will be segregated in 
vast power houses, and to the ordinary individual it will be- 
come a curiosity, as all users will obtain their light, power and 
heat from electrical distribution stations." 

Another one from Mr. Edison: "When you consider the 
electric motor has but one single moving part and that that 
rotates, it is safe to say the electric motor will move the world." 

Yet another: "In a few years all the railway terminals in 
the large cities will be electrified. In all mountainous countries 
where there are water powers, the main lines will be electrified, 
and ultimately" and I would like to alter that word, and say 
very nearly, very early "the advancement of science will be 
such as to cause all railroads to be run electrically." 

"All vehicle traction in cities will in a few years be electrical 
for the reason that the electric motor has only one moving part 
and that has a rotary motion, whereas a gasoline truck has two 
hundred moving parts." 



ADDRESSES OF SAMUEL INSULL 

I have been very much in the habit when addressing people 
connected with H. M. Byllesby & Company to appeal more 
especially to the young men. I prefer to address myself to 
the young men because I am still foolish enough to think I am 
nearer to them than I am to the old men. And in addressing 
the young men I do not know any better subject, any better 
name to point to, than this talismanic name across the hall 1 
which it has been my privilege to work under for upwards of 
thirty-three years. 

As I have often told you, and told my own people with the 
Commonwealth Edison Company, it is not possible for all of 
you to get to the top; it is not possible for all of you engineers 
to become Edisons; but it is possible for you to use the general 
scheme, follow out the general scheme, to have the same am- 
bitions, to have the same power of continuously sticking at a 
thing that Mr. Edison has himself. I remember once sitting 
in his laboratory, at a time when I was his private secretary, 
when a gentleman called on him and introduced his son and 
said: "Mr. Edison, I wish you would give my son some motto 
to remember." In a flash Mr. Edison turned to the young man : 
"Young man, never look at the clock." I would add to those 
words and say: "Never look at the clock except in the morn- 
ing." 

I asked Mr. Edison to write down some message to the 
young men here, and I will read it to you. It is in his own hand- 
writing. He said: "When you get a job, pitch in, pay no at- 
tention to time. Get more interested in the business than the 
old man himself. Think of nothing and talk of nothing but 
shop. Then when you want to leave to better yourself the 
old man won't let you. He'll raise your salary or take you 
in as a partner." 

CONCENTRATING THE PRODUCTION OF ENERGY 

Before I take my seat I would like, as I always like, to blow 
my own trumpet a little bit. 

1. Referring to the name of Edison in letters of light on the balcony of 
the banqueting room. 



THE NAME OF EDISON 253 

It was my privilege this afternoon to take Mr. Edison to our 
two power houses down here on the Chicago River and to re- 
mind him of the time thirty-one years ago [March 1, 1881] 
when it was my privilege to be shown by him the first central 
station in the world. He said: "How it has grown since then! 
Of course it has grown beyond all we expected. I never 
dreamed we would have more than 10,000 horse-power units." 
I think at the time he showed me his plant he probably had 
about 10 horse-power units, or maybe 20 horse-power units. 
I felt very proud in showing him through our stations and the 
work that had been accomplished in the last few years. He 
asked me something about the figures. I told him ten years 
ago we had 30,000 horse-power. Three years ago we had about 
150,000 horse-power and last night we had a load of 300,000 
horse-power. 

That gives you some idea of the great growth that has taken 
place in this community. But if you will place parallel to that 
the growth that has taken place in the various plants and cor- 
porations controlled by H. M. Byllesby & Company, which to 
a very large extent are located in centers where the growth in 
population is far greater than it is in Chicago, you will find 
that those figures, although they may sound very large when 
the fact that they exist in one great central station, or rather 
in one great centralization of power in one state is considered, 
are relatively small in comparison .with your own figures. I 
asked Mr. Edison what he thought would occur in the next 
ten years or twenty years in our line of business. He said that 
he thinks within our own time practically every wheel of indus- 
try, practically every wheel of transportation, will be operated 
from a central station. 

I am firmly convinced of this from our experience here in 
Chicago. It is not an economical proposition to produce 
energy for use in a community in any district, we will say, 
with any considerable density of population except under one 
organization. 

That is the course toward which we are working. You 
young men here have far greater opportunities for achievement 



254 ADDRESSES OF SAMUEL INSULL 

with the work that must take place in the next twenty years 
than those of us who have been engaged in this business for the 
last three decades. 

All I ask of you is to take that name (indicating the name of 
Thomas A. Edison) as your inspiration, as those of us who are in 
prominent positions in this business today have been fortunate 
enough to take it during the last thirty years. 



THE RELATION OF CENTRAL-STATION 

GENERATION TO RAILROAD 

ELECTRIFICATION 1 

I AM NOT going to discuss the question of the practicability 
of steam-railroad electrification. That is not a matter at all 
within my province. That is a matter that has to be de- 
cided by those great captains of industry who are in control of 
the vast transportation companies in this country from the 
Atlantic to the Pacific. But it is reasonable, as a central- 
station man, that I should assume that the electrification of 
steam railroads has come to stay; that the work done by the 
two premier trunk lines centering in New York is a sufficient 
indication of what we may expect in the future. I am not in 
sympathy with an agitation to force the steam railroads in this 
country to electrify. That is a question of the provision of the 
capital necessary for the purpose, and that question must be 
taken up and settled by those who are responsible for the opera- 
tion of the railroad properties. Nor am I going to discuss what 
might be termed the technique of the electrification of steam 
railroads; that is, the special system that should be used, 
whether it should be done with one class of current or another, 
or one pressure or another. The system finally decided on 
must be the one which fills conditions of railroad operation, 
and at the same time renders it possible for the railroad com- 

1. One of the most important of Mr. Insult's addresses was that delivered 
before the American Institute of Electrical Engineers in New York on April 
5, 1912, and reprinted here. President Gano Dunn presided at the meeting, 
introducing first Mr. Frank J. Sprague, chairman of the railway committee, 
who had requested Mr. Insull to give the Institute the results of his experiences. 
Mr. Sprague spoke in laudatory terms of the work accomplished in Chicago by 
Mr. Insull and his associates. An animated discussion followed the presenta- 
tion of the address, and a brief account of the debates'in both New York and 
Boston will be found on subsequent pages. 

255 



256 ADDRESSES OF SAMUEL INSULL 

pany to take advantage of the sources of energy supply already 
existing, as the railroad demand is only about 15 to 20 per cent 
of the total demand for energy in any community. That 
amount of energy which the railroads require to operate their 
properties is really the thing that should turn them to central- 
station men for assistance, and I speak as a central-station man. 
The amount of energy required to operate the terminal and 
surburban systems of all the trunk lines centering in and around 
New York city (as I think I will be able to demonstrate to you) 
is, I believe, less than the amount of energy required to operate 
the isolated electric-lighting plants in the same territory. It is 
not a serious proposition. To my mind it is of less consequence 
to the properly operated electricity-supply company than the 
isolated-plant business was to the electric-light-and-power com- 
panies through the country twenty years ago, or even fifteen or 
ten years ago. 

A QUESTION OF ECONOMICS 

The problem of the relation of the central station to the gen- 
eration and primary distribution of energy, so far as the steam 
railroads are concerned, is a question of economics. It cannot 
properly be considered without taking into account the entire 
question of generation and primary distribution for any given 
center of population. If you consider steam-railroad electri- 
fication by itself, the amount of energy required seems to be 
very great indeed. If you consider it merely as a fraction of the 
supply of energy required by a community for all kinds of pur- 
poses, it is found to be simply an incident. Perhaps a more accu- 
rate title for this paper would be "The Generation and Primary 
Distribution of Energy for Given Areas," because that is the real 
question involved. It is not a new subject; it is a subject dealt 
with at great length in the presidential address of 1910 by my 
friend Mr. de Ferranti, when addressing our sister organization, 
the (British) Institution of Electrical Engineers. Mr. de Fer- 
ranti went farther than I am going in this discussion. He pro- 
posed a scheme of generation and distribution for the whole of 
Great Britain. He proposed a scheme that meant, in his 



RAILROAD ELECTRIFICATION 257 

opinion, a saving of 80,000,000 to 90,000,000 tons of coal a year 
for Great Britain. If the plan, which you must necessarily 
admit is reasonable, after studying the maps and curves pre- 
sented, were adopted in this country, my judgment is that it 
would mean the greatest conservation of one of the most im- 
portant natural resources of the country, fuel, to the extent, 
probably, of from 100,000,000 to 150,000,000 tons of coal per 
year. 

The method of concentration of generation and distribution 
of primary power, as I said, is not a new subject. It has been an 
absolute necessity in all the smaller communities of this country. 
First, in the small communities they formed companies to do the 
public lighting; next they added to that the incandescent-light- 
ing business; a little later they added the power business; then 
they connected up two or three small towns together; and today 
the average prosperous small local company supplies energy not 
only for lighting, whether for domestic or commercial or public 
purposes, but for power, for pumping water, and for the urban 
and interurban transportation, and as a result has raised its load 
factor from about 20 per cent, when it was engaged solely in the 
lighting business, to from 40 to 50 per cent today. That method 
of concentration of generation is going on to such an extent in 
the smaller communities throughout this country that I know of 
cases where, in an area of 15,000 square miles, that is, an area 
150 miles one way by 100 miles another way, they seriously 
have in contemplation doing away with possibly 100 to 120 gen- 
erating stations, and replacing them with ten or twelve stations. 

TAKING ENERGY FROM ONE SOURCE OF SUPPLY 

Where there are large water-powers adjacent to the larger 
cities, you find no hesitation on the part of the railway company, 
the electric-light-and-power company and the electrified steam- 
railroad company, if there be such in that vicinity, taking their 
energy from one source of supply. Is there any reason why 
the power generated at Niagara Falls can be used alike for all 
these enterprises, whether they be local public-service enter- 



258 ADDRESSES OF SAMUEL INSULL 

prises, state public-service enterprises, or interstate enterprises 
is there any peculiarity about the fact that the power is gen- 
erated hydraulically? Is that any special reason why these 
various industries should all take their energy from a given 
source? Is it not just as reasonable that they should all take 
their energy from a given source, if that power is supplied from 
fuel, from coal, with steam turbines as the prime movers, as 
that they should do this when the power is supplied from water 
with hydraulic turbines as prime movers? I cannot see any 
reason, if concentration of production is the correct principle 
in one case, why concentration of production is not the correct 
principle in every case. 

I have naturally taken for the purposes of my discussion 
the information which the engineers of public-service enter- 
prises in New York have placed at my disposal, together with 
the information that I naturally am able to obtain from my own 
operations in Chicago. The conclusion that I have come to 
is that the concentration of the production of energy, for all 
purposes required in a given area about any large center of 
population, would result in such a saving in capital and such 
a saving in operating expenses as to provide sufficiently for 
the generating capacity and primary transmission systems 
necessary to electrify the terminal systems and suburban ser- 
vice of all the trunk lines centering in and around that center of 
population. Particularly is this true in the case of New York. 
Furthermore, the saving would be such as to yield very large 
profits, in addition, to the engineers and financiers having the 
courage to handle so great a problem. 

The percentage of saving is comparatively small. On a 
percentage basis I may say that the percentage of saving in 
Greater New York (and in "Greater New York" I include 
that part of the Jersey shore that would naturally be considered 
a part of a Greater New York) is comparatively small, and to 
my mind somewhat disappointing, owing to peculiar conditions 
which I will explain later. But the saving itself is so large and 
amounts to such a great sum of money, capitalized, that I can- 
not see how it is possible, whatever may be the jealousies of 



RAILROAD ELECTRIFICATION 259 

management, and whatever may be the individual interests 
of the financial people operating the various properties both 
as engineers desiring to get the greatest possible results out of 
their work, and as capitalists wanting to supply the greatest 
possible amount of service at the lowest possible cost to the 
public and the greatest possible profit to themselves I can- 
not see how either the engineers or the financiers can neglect 
the subject and let it pass by, as it is one of the greatest oppor- 
tunities I know of in our business. 

THE NEW YORK SITUATION 

To take up now the illustrative curves, Fig. 1 is the New 
York total-load diagram. It includes the present electrical 
load of the central stations in Greater New York and the 
central stations on the Jersey shore, within a radius of ten or 
twelve miles of New York, operated by the Public Service Cor- 
poration of New Jersey, and the station of the Hudson and 
Manhattan Railroad Company. 

The diagram includes only that portion of the load of the 
electrified steam roads which has already been electrified, and 
does not include an estimate of the load of the isolated plants. 
If the remainder of the load of the electrified steam roads and 
the isolated-plant load were included, the total would be in 
the neighborhood of 1,000,000 kw. 1 

Looking ahead, if you take the New York maximum of 
676,000 kw. and apply an 8 per cent annual increase (the actual 
increase of this maximum over the previous winter was 7.5 
per cent), at the end of eight years the New York maximum 
would amount to 1,250,000 kw., and at the end of ten years to 
1,480,000 kw. 

If there be added to these figures the isolated-plant and 
steam-railroad demand, it makes about 1,000,000 kw. of load 
at the present time. The steam-railroad demand would be 
about 170,000 kw. of that total, and the demand made by 
isolated plants would be 217,000 kw. 

1. In this paper the abbreviation "kw." is used for "kilowatt" or "kilo- 
watts." 



260 



ADDRESSES OF SAMUEL INSULL 



The total load of the systems separately is 678,000 kw., and 
there is a diversity factor that would reduce that if .they were 



NEW YORK-TOTAL 

JAN. 5 1912 DAY OF COMBINED MAXIMUM] 

MAXIMUM AS SEPARATE SYSTEMS 

ANNUAL 
LOAD 

MAXIMUM blVERSlTY FACTOR 

LIGHT AND POWER 232.500 34,700 17. Bt 35.84 
STREET RAILWAYS 382,110 9,630 C.8 37.6 
STEAM ROADS 63,620 3,090 5.1 37.6 



700,000 



600,000 



12 2 A 6 8 10 12 




Fig. 1 

all run as one system; that is, if the present business of the 
lighting-and-power companies, the street railways and the 
steam railroads were combined, the maximum load this last 



RAILROAD ELECTRIFICATION 



261 



winter would have amounted to 630,000 kw., or a saving of up- 
wards of 47,000 kw. The diversity factor amounted to 7.5 
per cent, and the load factor would have been improved from 



NEW YORK 
LIGHT AND POWER 

JAN.5.1912 DAY OF COMBINED MAXIMUM 

MAXIMUM AS SEPARATE SYSTEMS 

ANNUAL 
LOAD 
MAXIMUM DIVERSITY FACTOR 

NEW YORK EDISON 168,000 25,000 17.5$ 32.4$ 
PUBLIC SERVICE 29,000 3,800 15.2 

BROOKLYN EDISON 86,500 t.900 19.9 35. 8 
TOTAL 282,'BOO 84,700 17.5% 33. 8^ 



=r| (170,000 



150,000 




10 12 



P.M. 



Fig. 2 



36.9 to 40 per cent. Later, I will explain some of the advan- 
tages obtained from that. 

Fig. 2 is the New York light-and-power load diagram. The 
New York Edison Company curve includes the load of the 
United Electric Light and Power Company and also the Bronx 
load. The Public Service Corporation curve includes that 



262 



ADDRESSES OF SAMUEL INSULL 



company's light-and-power load only, its street-railway load 
being on the street-railway curve. 

The total load is 232,500 kw. The load factor of the various 



190,000 



170,000 



INTERBORO 182,000 
BROOKLYN 116,050 
8RD AVE 28,720 

HUDSON AM. 13,840 
PUBLIC 6ER. 41.600 




30,000 



10,000 



1 



systems by themselves is 33.8 per cent. There is a diversity 
of 17.5 per cent, amounting to 34,700 kw., between the sum of 
the maxima for the year of these different lighting companies 
and their load between 5:45 and 6 p.m. on January 5, 1912, 



RAILROAD ELECTRIFICATION 263 

which was the time of the maximum for all the New York 
companies combined; that is, the lighting, the street-railway 
and the electrified steam-railroad companies. 

Fig. 3 shows the load diagram of the street railways of New 



32,000 



NEW YORK-STEAM R.R. 

JAN. 6, 1912 DAY OF COMBINED MAXIMUM 
MAXIMUM AS SEPARATE SYSTEMS 

ANNUAL 

MAXIMUM DIVERSITY LOAD FACT 
PENNSYLVANIA 80,0001,600 5.6* 39.1* 

28,000 NEW YORK CENTRAL 24,200 600 2.0 36.6 
NEW HAVEN 9.420 890 10.4 

83,620 3,090 



12 2 4 6 8 10 12 4 6 8 10 12 




Fig. 4 



York city. The Interborough has much the largest maximum 
of any of the New York companies, and therefore establishes 
the day and hour of the combined maximum, and there is no 
diversity between the Interborough load and the combined 
maximum. The diversity between the three power houses, 



264 ADDRESSES OF SAMUEL INSULL 

subway, surface and elevated, of the Interborough has not 
been taken advantage of, and possibly amounts to a consider- 
able figure. What is meant by that is that I have not taken 
advantage of it in making these diagrams, because the interests 
having charge of the street railways, I believe, have already 
taken advantage of it by connecting up their various power 
houses, so as to get the advantage of the diversity factor. 

Fig. 4 shows the load diagram of the steam railroads enter- 
ing New York city. Due to the electric heating of the subur- 
ban cars, the New York Central maximum occurs on the same 
day as the Interborough and the combined maximum, and the 
Pennsylvania maximum, for the same reason, only a few days 
later. 

The present electrical load for the passenger service of the 
steam railroads of New York is estimated at about two-thirds 
of the total load if all of the passenger service within a reasonable 
radius of, say, fifteen to twenty miles of New York city were 
electrified. This would give for New York a total electrified 
passenger load of 95,000 kw., as compared with our estimate 
for Chicago of 73,000 kw., which appears reasonable. If to 
this we add 75,000 kw. for freight, as compared with our esti- 
mate for Chicago freight of 78,000 kw., we get a total for 
the electrified steam railroads in the vicinity of New York of 
170,000 kw. 

Attention might be called to the fact that the farther out the 
steam railroads are electrified, the less influence the suburban 
service will have, and therefore the greater the diversity factor. 

There is a very important point I wish to emphasize, that 
has a bearing on this subject only in the large centers of popula- 
tion where there is heavy suburban travel. The same thing 
will be shown in some of the curves to follow. These two 
maximum loads, morning and evening (Fig. 4), are made up 
of suburban business, and the suburban-railroad load maxima 
are largely affected by the heating proposition, and also the 
large amount of power needed additionally for traction in cold 
weather. That condition cannot possibly exist except in a 
few, perhaps a dozen, cities of the United States. The steam- 



RAILROAD ELECTRIFICATION 



265 



railroad load factor is relatively poor in those centers, but if 
you will take the average business throughout the country 
where our central stations are in cities, say, of the second and 



BOSTON 



TOTAL 



JAN.5, 1912 DAY OF COMBINED MAXIMUM 
-MAXIMUM AS SEPARATE SYSTEMS 



MAXIMUM DIVERSITY FACTQIR 
UQHT A POWER 52,800 14,800 89.0# 32.7? 
STREET RAILWAYS, 68.400 900^ 1.6 

TOTALS 111,2001 

TOTALS 95,400) 




Fig. 5 

third grade, the steam-railroad load would show a very much 
better load factor, as there is practically little or no suburban 
business in any cities except the very largest cities of the country. 



266 ADDRESSES OF SAMUEL INSULL 

THE BOSTON SITUATION 

Fig. 5 is the total- load diagram of Boston. The street- 
railway curve is the Boston Elevated Railway Company load, 
which includes the subway, surface and elevated roads. The 
Edison light-and-power load is also given. 

A careful estimate of the electrical requirements, for the pas- 
senger service only, of all the steam roads operating within the 
metropolitan district of Boston, has been made, but as the 
figures do not include freight, and also for the reason that the 
larger portion of it is based on 11,000-volt single-phase operation, 
which system practically eliminates the possibility of showing 
savings in transmission and substation by combining with the 
other local power supply, I have not attempted to include load 
curves for the electrified steam roads. Also no estimate has 
been made of the isolated-plant load in Boston. The total 
rating of the Boston steam plants, 160,600 kw., amounts to 
a reserve on the combined load of 68 per cent. 

It will easily be seen that there is a remarkable diversity 
between the loads of the street-railway and lighting-and-power 
companies in Boston. To me it seems almost incredible that 
there should be built a second large power station in Boston, 
when, if the service for both the lighting and railway were run 
by the same station, the maximum load last winter would have 
been 95,400 kw., instead of 111,200 kw., as there is a diversity 
of 16.5 per cent between the two businesses; and yet so blind are 
some people to their own interests that the financial men 
running the Boston elevated roads are actually throwing money 
away by building a plant for themselves right by the side of the 
plant of the Edison Illuminating Company of Boston. 

THE CHICAGO SITUATION 

Fig. 6 shows the total-load diagram for Chicago. The diver- 
sity shown in the tabulation on this chart amounts to 72,260 
kw., and would require, assuming a 25 per cent reserve, 90,300 
kw. more capacity if operated as separate systems than if op- 



RAILROAD ELECTRIFICATION 



267 



650,000 
600,000 



CHICAGO -TOTAL 

JAN. 3 1912 DAY OF COMBINED MAXIMUM 

. MAXIMUM AS SEPARATE SYSTEMS 



LIGHT A POWER 100,540 12,670 14,4$ 35. 4^ 

STREET RAILWAYS 186,920 13,990 8.1 * 

194,300 24 300 14.4 

146,750 21,300 17.0 48". 



500,000 



400,000 



300,000 



200,000 



100,000 



122468101224 




268 ADDRESSES OF SAMUEL INSULL 

crated on a combined generating system. At $75 per kw. this 
amounts to an extra investment of $6,772,500. 

The isolated-plant load, although showing a maximum 50 
per cent greater than our present light-and-power load, I 
believe has been estimated conservatively low. A canvass 
of the number and size of isolated plants was made by the 
contract department of the Commonwealth Edison Company, 
and several checks on these figures were available, such as 
"The Engineers' Directory," the agents' knowledge of the 
field and the City of Chicago Boiler Inspectors' records. 

In estimating this isolated-plant load, the separate maxima 
of the plants are assumed to be two-thirds of the rated capacity, 
and the load factor, that is, the ratio of the average kilowatts 
for the year to the maximum kilowatts, is assumed to be 25 
per cent, the assumption being based on the fact that the actual 
load factor of customers on our wholesale schedule, representing 
a very large amount of business, is 26 per cent. 

On account of the diversity between the different isolated 
plants, it is assumed that their load factor, if combined, would 
be equal to the load factor of the Commonwealth Edison Com- 
pany's general light and power business; that is, 35.5 per cent. 

To the maximum kilowatts and kilowatt-hours thus obtained 
are added a certain portion of the South Chicago Steel Works 
load, the refrigeration load, assuming that one-half the ice of 
Chicago is produced electrically, and the electric-vehicle load, 
assuming two -thirds of all horses replaced by electric vehicles. 
These latter two items, being off-peak loads, improve the load 
factor up to the figure shown, although they represent only 
17 per cent of the total estimated kilowatt-hours of the isolated 
plants. 

The increased investment necessary as between these sys- 
tems being operated all as one, including steam railroads, and 
being operated as separate systems, taking the cost of generating 
plant plus the cost of the primary transmission system, would 
mean an expenditure of upwards of $10,000,000 to $12,000,000 
more than if the work is done on one system. We have got 
reasonably well started in Chicago towards doing it on one 



RAILROAD ELECTRIFICATION 269 

system. We have practically the most important part of the 
work, that is, the street-railway work, and we are trying there 
to do all we can to get the isolated plants out of existence. 
In the steam-railroad business, as may be seen from our esti- 
mates, in what is the greatest railroad center in the United 
States today, passenger, freight and transfer business combined, 
the amount of energy required for operating all of the terminal 
systems there is so small a percentage of the whole that it 
would seem unreasonable to think we will not be able to get 
that, as well as the business of the surface and elevated railroads. 

The next diagram, Fig. 7, shows the load curve of the street 
railways of the city of Chicago. One interesting feature of this 
chart is that the highest maximum for two of the street-railway 
companies occurred in the morning of February 21, soon after 
the beginning of a very heavy snow storm, with a strong cold 
wind blowing and the temperature a little above 20 deg. Fahr. 
That chart is generally characteristic of the urban transporta- 
tion business of a city of the size of Chicago. 

Fig. 8 shows the load diagram of the electrified steam rail- 
roads of Chicago, assuming that the steam railroads in the 
vicinity of Chicago are electrified some time. It is a load 
diagram of the maximum for the year. The method of estimat- 
ing all of the data regarding the load of the electrified steam 
roads of Chicago is given in detail in the appendix to this paper, 
on "Electric Power Requirements of Chicago Steam Railroads 
Electrified 1911-1912," prepared by Messrs. Bird, Gear and 
Fowler. 

The freight curve, you will see, has an extremely good load 
factor. The passenger business is governed by exactly the 
same conditions, only intensified, that govern the passenger 
business in New York city. I presume the curves of passenger 
business in New York, Chicago, Boston and Philadelphia would 
probably be all about the same, except that Philadelphia, 
Boston and New York ought to have some advantage from a 
much larger amount of pleasure business in the summer than we 
get in Chicago. 

The extreme peak in the morning and evening is caused by 



270 



ADDRESSES OF SAMUEL INSULL 



the suburban business, the extra amount of energy necessary 
at the time of extreme cold for traction purposes and the extra 
amount of energy necessary for heating purposes. If it were 
not for these two peaks, the load factor would even up better 
than it does, and yet, notwithstanding these peaks, the com- 



80,000 




CHICAGO STREET RAILWAYS V 

JAN. 3, 1912 DAY OF COMBINED MAXIMUM 

MAXIMUM AS SEPARATE SYSTEMS 

ANNUAL 

MAXIMUM DIVERSITY LOAD FACTOR 
JCITYRY8. 49,8304,100 6.1* 40. 9 % 

CHICAGO RY8. 81,1208,490 11.7 41.2 

(ELEVATED RYS. 55.970 1,400 2.6 89. z 

TOTALS 186,920 13,990 8.1 



40.62 



30,000 



20,000 



10,000 



Fig. 7 

bined freight and passenger business is estimated to have 46 
per cent load factor. Now if we consider the steam-railroad 
business, say in cities of the size of Cleveland, Detroit, Buffalo, 
and possibly Rochester, Toledo, and similar cities, their load 
factors would be uniformly better than is shown in Fig. 8. In 



RAILROAD ELECTRIFICATION 

my judgment the date of the maximum load, and the time of 
day of the maximum load, would probably change consider- 
ably, to the advantage of the local power company supplying 
the energy. 

I thought it might be of interest to include a chart of the 
annual load factors of the Commonwealth Edison Company 



150,000 



130,000 



110,000 



90,000 



CHICAGO -STEAM R.R. 

REQUIREMENTS IF ELECTRIFIED 
MAXIMUM FOR YEAR-DECEMBER 



FREIGHT 78,000 NOV. 
PASSENGER 73,750 DEC. 

TOTALS 146,750 DEC. 




70,000 



50,000 



30,000 



10,000 



for the last twelve years, as shown in Fig. 9. You will notice 
that the street-railway load factor went up and then dropped. 
It was at its highest for a few years just before one of the large 
street railways shut down its obsolete stations, which it had 
operated as "peak plants" only. This shutting down had also 
the result of earning it a very low price for the energy it pur- 
chased. The tendency of the railway load factor is to run 



272 



ADDRESSES OF SAMUEL INSULL 



even. The tendency of the light-and-power load factor is to 
run up. The combined load factor, as shown in Fig. 9, is 
about 42.5. The light-and-power business by itself has a load 
factor a little under 35, and the street-railway business by itself 
about 43 per cent. 

TAKING ADVANTAGE OF THE DIVERSITY FACTOR 

Consider the diversity in a block of apartments. This 
diagram 1 has been used a number of times, both by myself and 



ANNUAL LOAD 
FACTORS. 

COMMONWEALTH EDISON COMPANY 




1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 
YEARS ENDING JUNE 30th 

Fig. 9 

by some of my subordinates in writing papers on different sub- 
jects where the question of diversity and load factor comes in, 
for it is a striking illustration of diversity. The drawing 
shows a city t>lock composed of average apartments, much alike. 
Here are nearly 200 customers, all living in similar apartments, 
all of about the same class, all with about the same habits of 
life, and yet the difference in the load factor, taking each cus- 
tomer by himself, as compared with all of them put together, 

1. In this collected edition of Mr. Insull's addresses this drawing is given 
as Fig. 1 of the address on "Centralization of Energy Supply," page 448. 



RAILROAD ELECTRIFICATION 273 

is such that you get almost four times as good a load factor, 
and that is owing to the diversity of demand. That is the 
fundamental basis of the profit-making of an energy-selling 
company. We get that average in dealing with small customers 
and consequently we can sell these small customers at a profit 
as a whole, whereas any engineer who knew the facts could 
demonstrate to me that each one by himself is a loss to us. 

It is exactly that same principle I am getting down to 
the fundamentals, the A B C of energy production and distri- 
bution that I and others who advocate the same ideas want 
to see brought about in all the electric-supply business, whether 
it is in large communities or small communities. I want to see 
somebody get the advantage of the diversity factor that exists. 
In one case, with small customers, it may show 400 per cent 
advantage. In another case, in a large community like the 
city of New York and surrounding territory, that percentage 
may be only ten per cent. But it runs up into millions of 
dollars, which is being thrown away today. I do not want 
to see those who are right on the threshold of entering into our 
line of business, the use of electrical energy, make mistakes 
owing to their ignorance of the real situation. I do not want 
to see them make the mistake that, in my judgment, largely 
through force of circumstances, the New York Central Company 
has made in building its present power house, and the Pennsyl- 
vania Railroad Company has made in building its power house, 
probably, I think, as much because they could not find people 
to sell them energy as because they did not know they ought to 
buy energy instead of manufacturing it. 

DISTRIBUTION AND LOAD FACTOR 

Fig. 10 is a map of New York city, with the present power- 
transmission systems. In referring to New York city, you 
will notice that I go out on the Hackensack River into New 
Jersey, as I consider that territory properly a part of the area 
included in the greater city for the purposes of the present dis- 
cussion. 



274 



ADDRESSES OF SAMUEL INSULL 



Fig. 11 shows the New York power-transmission system 
unified into one system. You will notice the difference be- 



NEW YORK 

PRESENT POWER 

TRANSMISSION 

SYSTEMS 



JAMAICA BAT 
Swamp 



Q Generating Station 

Lighting Sub-Station 

Railway Sub-Station 

e Joint Sub-Station 




Fig. 10 

tween the two. In Fig. 10 the number of substations and trans- 
mission lines is in marked contrast to the effective distribution 
in Fig. 11. 

Fig. 12 shows the Chicago daily load factor. This diagram 



RAILROAD ELECTRIFICATION 



275 



shows the improvement in load factor as it affects operating 
conditions, the improvement being due mainly to the railway 



NEW YORK 

UNIFIED POWER 



TRANSMISSION 
SYSTEMS 



Generating Station 

. Lighting. Sub-Station 

Railway Sub-Station 

o Joint Sub-Station 




Fig. 11 

load coming up earlier in the morning and the depression in the 
light and power load at the time of the evening railway peak. 
It is almost impossible to figure absolutely and closely this 
saving from concentration of production of electrical energy. 



276 



ADDRESSES OF SAMUEL INSULL 



It is easy enough to figure the saving of investment, but it is 
pretty hard to figure the saving in operating expense. It is a 
very large amount, indeed, and the items especially affected 
are the items of what one might call "readiness to serve," 



CHICAGO 

MONDAY JULY 17.191 1 
DAILY LOAD FACTORS 

N. LIGHT & POWER 
HICAGO RAILWAYS 
Y RAILWAY 

ATED RAI LWAY8 
CTRIFIED STEAM ROADS 
IGHTED AVERAGE 
BINED ON ONE 
RATING SYSTEM 



8 10 13 2 4 




280,000 



240,000 



200,000, 



160,000 



130,000 



80,000 



Fig. 12 

including, of course, the expenses incident thereto. I do not 
refer to fixed charges but to operating expenses outside of fixed 
charges. Although it is easy to figure the saving in fixed 
charges due to diversity, it is not so easy to figure the saving due 
to the broadening out of this daily curve, but it goes a long 



RAILROAD ELECTRIFICATION 



277 



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278 



ADDRESSES OF SAMUEL INSULL 



way towards reducing the "readiness-to-serve" charges per unit 
produced in a given time. 

In Table I is a tabulation of the daily load factors in 
Chicago. This expresses the matter a little differently. The 



BOSTON 

MONDAY JULY 17,1911 
DAILY LOAD FACTORS 



48,000 



GHT AND POWER 69. 5 
STREET RAILWAYS 48. 6 

EIGHTED AVERAGE 
COMBINED ON ONE 

ENERATING SYSTEM 




P.M. 



Fig. 13 



average daily or operating load factors for the different sys- 
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teen and one-half hours straight-line or steady operation per 
day. The load factor for all combined on one generating sys- 
tem, 59.9 per cent, is equivalent to fourteen and one-half hours 



RAILROAD ELECTRIFICATION 



279 



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280 



ADDRESSES OF SAMUEL INSULL 



per day, or an increase of one hour, or 7.4 per cent. This im- 
provement means that the fixed-charge and "readiness-to-serve'* 
portion of the operating expense is prorated over a greater num- 
ber of units of output per day and per year. 

You will notice, as shown in the table, the improvement in 



A.M. 



P.M. 



12 2 4 6 8 10 12 2 4 ^6 8 10 13 



COMMONWEALTH EDISON COMPANY 
NEW YORK EDISON COMPANY 



LOAD FACTOR 

COMMONWEALTH CO. JAN.3,1912 55. 7$ 

COMMONWEALTH CO. DEC. 18,1902 42. 3 
NEW YORK EDISON CO. DEC. 21, 1911 44.0g 




20,000 



Fig. 14. Chicago and New York. Load 
Diagrams for Maximum Day of Year Pro- 
rated to Chicago 1912 Maximum for Com- 
parison. 

conditions in each month in the year. The average shows a 
decided improvement if the systems are combined in one. The 
average is 59.9 and the average of the others, separately, is 
55.6 per cent. 

Fig. 13 shows a diagram of the Boston daily load, and Table 
II is a tabulation of Boston daily load factors. It is shown 
that there would be quite an improvement if the Boston Ele- 
vated and the Boston Edison loads were operated together. The 



RAILROAD ELECTRIFICATION 281 

average is 53.9 per cent operated separately and 59.4 per cent 
if operated as one system. 

Taole III gives a tabulation of the New York daily load 
factors. It gives the same general character of information. 
Operated separately the stations show 51 per cent, and oper- 
ated together 56.2 per cent. 

Fig. 14 is a comparison of the Chicago and New York load 
diagrams. In this diagram the different load diagrams shown 
have all been prorated so that the maxima of all are equal and 
the same as that for Chicago for January 3, 1912. This 
method of comparing load diagrams shows just what hours of 
the day are affected by the improvement in load factor, and 
brings out perhaps more clearly than any other method the 
great advantage from an operating point of view of the com- 
bining on one generating system of the energy supplied for dif- 
ferent purposes. This improvement, for instance, for Chicago 
as compared with New York, has a very decided effect upon 
the operating cost, and is one of the principal reasons for the 
very low generating cost in Chicago. 

The effect of diversity on the peak, which results in a saving 
in investment, can be and has been very readily figured. But 
the effect of this diversity in reducing the operating cost cannot 
be so readily calculated. Nevertheless, there is no doubt that 
the saving in operating expense is fully as important as the 
saving in investment. 

SOME OF THE RESULTS AND POSSIBLE RESULTS 

Fig. 14 was prepared to show exactly the result of the policy 
the Commonwealth Edison Company has pursued in Chicago 
for the last ten years. It was just about ten years when we 
commenced to sell energy at prices that most of the producers 
of energy in this country thought were so ridiculously low that 
it was only a question of time and the size of our pocket-book 
as to how long we could stand it. This diagram shows you the 
result we have been able to obtain. As a contribution to our 
fixed charges, as a contribution to our stand-by charges, as a 



ADDRESSES OF SAMUEL INSULL 

means of producing more kilowatt-hours in a given period, so 
as to provide us with the necessary funds to adopt a reasonably 
bold policy of selling energy, in ten years we have been able to 
attain this result. 



P.M. 



I.OAD FACTORS 

COMMONWEALTH CO. JAN.3, 1912 55.7^ 
COMMONWEALTH CO. DEC. 18, 1902 42.3$ 
BOSTON EDISON CO. DEC. 22. 1911 44.3JC 




Fig. 15. Chicago and Boston. Load Dia- 
grams for Maximum Day of Year Prorated 
to Chicago 1912 Maximum for Comparison. 



Fig. 15 is a comparison of the Chicago and Boston load dia- 
grams. 

Fig. 16 is a map showing the Chicago railroad terminals in 
the proposed electrical zone, the boundary of which was laid 
out by the Chicago Association of Commerce. The zone in- 
cludes a territory about 32 miles long, with an average width of 
ten to twelve miles. 

Fig. 17 is a map of the electrification of steam railroads in 
Chicago, based on a plan of group operation; that is, a plan of 



CHICAGO 

RAILROADS TERMINALS 

IN PROPOSED 
ELECTRICAL ZONE 




Fig. 16 



CHICAGO 

ELECTRIFICATION 

OF 

STEAM RAILROADS 
GROUP OPERATION 

Generating Station 




Fig. 17 



ELECTRIFICATION 

OF 
STEAM RAILROADS 



UNIFIED POWER SUPPLY 



Generating Station 
Present Sub-Station 

Proposed Sub-Station 




Fig. 18 



ADDRESSES OF SAMUEL INSTILL 

stations, substations and primary transmission lines on the 
theory that the railroads of the various financial groups, the 
New York Central group, the Pennsylvania group, and so on, 
would operate their power jointly, the idea being that the New 
York Central would have a system for itself, the Pennsylvania 



80,000 



70,000 



CHICAGO 

FREIGHT AND SWITCHING 

ELECTRICAL REQUIREMENTS 

NOVEMBER 




10 12 



Fig. 19 

would have a system for itself, and so on all the way down the 
line. 

Fig. 18 shows the electrification of steam railroads, with uni- 
fied power supply, in the city of Chicago. That is what it 
would be like if all the companies obtained their power from 
one source, and shows the difference between purchased power 
and individual production. 

Fig. 19 is the load diagram of the freight electrical require- 
ments of the steam railroads in Chicago. This is a curve we 



RAILROAD ELECTRIFICATION 



287 



have had worked out in relation to freight business, and it 
shows some rather interesting things. This freight curve has 
an extremely good load factor, estimated at 70 per cent daily 
and 60 per cent yearly. Through freights come in during the 
early morning hours and are broken up, switched and transferred 
from seven o'clock in the morning on, and then during the late 
afternoon there is another switching and transfer peak caused 



JDVY AUG. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY 



80,000 



60,000 



40,000 



20,000 



























9 

2,000,000 

9 $ 

1,500,000 
01 
UJ 
Q. 

8 


l.OOO.OOOo 

a 

$500,000 

a 








<C ' 




V / 

V 


7\ 


ICREA8 

V 


;DTRA 


;TION c 


UETO 


COLD 


/ 


/ 
^ 


^ 





\ . 

V: 


& ^ 

2 


rt 

>< j 


VN 
o* 1S 


$\ 


?r--* 






YA 


/ 






\ 


^X, 


^ 


^ 

-^ 


^ 
--^, 


^>- 


, ^-" 


\ 

s 










%> 










^- 


82125 


$2200 


$2200 




$2225 


$2175 










^s 


^ 


j^ 

$1600 


^> 


$2000 










MONTHLY GROSS FREIGHT EARNINGS 
REPRESENTATIVE CHICAGO ROADS 
SANTA FE GREAT WESTERN GRAND TRUNK 
B. & O. MONON I'LL. CENTRAL 
NORTHWESTERN ST. PAUL ROCK ISLAND 
BURLINGTON ERIE WABASH 
YEAR 1.910-1911 


































EIGHT / 


TRICAl 
LL ROi 


REQUII 
DS-El 


EMEN1 
ECTRIC 


8- 
ZONE 


FR 



Fig. 20 

by the making up of the through freights and getting them ready 
to go out as soon as the late-afternoon passenger peak is over. 
The peak on the in-and-out freight of the day occurs from 
seven o'clock in the evening on, due to these outgoing through 
freights which were made up in the late afternoon. 

Fig. 20 is the diagram of the freight earnings and monthly 
freight electrical requirements of the roads in Chicago. It 
shows the monthly gross freight earnings for two years for a 
group of Chicago roads, and also for the Elgin, Joliet & Eastern, 
which latter ought to show whether local Chicago conditions 
vary materially from the curve for the trunk lines included, as 



288 



ADDRESSES OF SAMUEL INSULL 



it has been impossible to get, in any way, the figures of local 
earnings of the different trunk railroads. 

It has been assumed that normal electrical requirements of 
freight traffic will vary for the different months of the year 
similarly to the variation shown for the twelve roads for 1910 



CHICAGO 

PASSENGER 

ELECTRICAL REQUIREMENTS 

DECEMBER 




Fig. 21 

and 1911 and that these normal requirements will be increased 
during the winter months as show r n, on account of increased 
traction or increased resistance due to the cold. 

Fig. 21 is the load diagram of the steam-railroad passenger 
electrical requirements in Chicago. This diagram shows these 
requirements in December. It has the same general charac- 
teristics as the New York curve, with the high peak morning 



RAILROAD ELECTRIFICATION 



and evening, owing to the suburban passenger business and 
owing to the heating of the cars. 

Fig. 22 shows the passenger earnings and monthly electrical 



JLY AUG. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JL 


LY 

$ 

600 000 










,s. 


^ 


IN 


3REASE 


DTRAC 


riON D 


ETO 


OLD 


X< 


~~ __ 


^ 


<C 10 


*" 2 


J* 

a 


kj 


!_J 


^! 


fL. 


s*. 





400,000 
200,000 



^ 




^ 










s 


~ 


^^ 







- ! *~-' 


= 


x 


< 
























cc 

LU 
O. 




MONTHLY GROSS PASSENGER EARNINGS 
REPRESENTATIVE CHICAGO ROADS 
SANTA FE GREAT WESTERN GRAND TRUNK 
B. & O. MONON ILL. CENTRAL 
NORTHWESTERN 8T.PAUL ROCK ISLAND 
BURLINGTON ERIE WABASH 
YEAR 191 0-1 911 








1 























\ ELECTRICAL REodlREMENTS- 
THROUGH PASSENGER SERVICE- 
ELECTRIC ZONE-ASSUMIN'G 
AT HTHAT OFEARNINGSjOF 1910-1911 



Fig. 22 

requirements in Chicago, the latter being based on an assumed 
variation one-half that of the earnings for 1910-11. This 
diagram assumes, for through passenger business, that the 
cars will be heated by steam, and you will notice the increased 
energy which is required for traction owing to the cold. 



JULY AUG. SEPT. OCT. NOV. DEC. JAN. FEB. . MAR, APR. MAY JUNE JUCY 













TO 


FAL 










/ 






\ 














A 

M 


/ ^ 


TO EL 


:CTRIC 




r 






w* 


TRACT 


ON DU 


S ^ 4 


A 




2r; 


%&. 






^^^^^^ 


x^ ^ 




|-ZU*m 
M<? 


-gr 






c < 


0\S 


\ 


-10* g 








fts\ 


NO 


RMAL 




> 


^b 





60,000 



50.000 



40,000 



Fig. 23. Electrical Requirements for Suburban Rail- 
road Service in Proposed Chicago Electric Zone 

Fig. 23 shows the proposed steam-railroad suburban elec- 
trical requirements, month by month, in Chicago. In addition 
to the normal amount of energy required, there is the increased 



290 



ADDRESSES OF SAMUEL INSULL 











X 


*\ 














140,000 
120,000 
100,000^ 

80.000 | 
_j 

9 

60,000 
40,000 
20,000 








/ 








X 


s. 













rot^ 


/ 










\ 








> 


^ 
















X 






7^- 






















^^*v 


















































* 




m - 


U^ 


- 


"V^^ 














50^ 










.*-**" 




\ 








/ 








X 














X 






x, 








x 










^v 


^^^ 








THR 


OUQ.. 


PASSED 



























































































JULY >UQ. SEPT. OCT. NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY 

Fig. 24. Monthly Variation in Maximum Electrical 
Requirements in Proposed Chicago Electric Zone for 
Railroads 




A.M. 



P.M. 



Fig. 25. Relation of Swing Maximum to One-Hour Maximum. 
New York, New Haven and Hartford Railroad, Cos Cob 
Station, July 17, 1911 



RAILROAD ELECTRIFICATION 291 

requirement for traction due to cold, and the increase due to 
electric heating. 

Fig. 24 shows the monthly variation in the total electrical 
requirements in the proposed electrification of the Chicago 
steam railroads. You will remember that the load factor of 
the through passenger business is extremely good, and of the 
freight business extremely good. That would indicate, except 
in the ten or twelve large cities to which I have referred, that 
the freight and passenger business ought to be very good 
throughout the country. 

Fig. 25 gives a comparison between the swing maximum and 
the one-hour maximum load on the New York, New Haven & 
Hartford Railroad Company's Cos Cob station. This diagram 
of the New Haven road is important because it shows that 
small roads installing their own plants must provide machinery 
sufficient to cover the maximum swing, which frequently lasts 
several minutes, and which, in the case of the New Haven road, 
apparently necessitates a reserve amounting to 74 per cent. 

The three-phase rating of their generators is 21,000 kw. and 
their maximum load is 9,050 kw., which is a reserve of 132 per 
cent. But their single-phase operation really reduces the act- 
ual capacity of the generators, on a single-phase basis, to 15,000 
kw., which is equivalent to 74 per cent reserve. They appar- 
ently have no greater reserve than is necessary, because they 
are installing three 6,000-kw. three-phase units to take care of 
additional electrification. 

In another part of the paper, for the purpose of figuring the 
rating of the steam plants if each of the roads installed its 
own plant, instead of using this actual 74 per cent reserve, we 
have assumed 50 per cent, to be conservative, as compared 
with 25 per cent reserve in case of purchase of energy. 

The point brought out in this curve is also important from 
an operating point of view, because, with a system of central 
stations for all energy used in a community, the entire load 
factor would be in the neighborhood of 60 per cent, as shown in 
Table I, compared with 25 per cent for this diagram using the 
maximum swing. 



292 ADDRESSES OF SAMUEL INSULL 

POSSIBLE SAVING BY CONCENTRATION OF PRODUCTION AND 
PRIMARY DISTRIBUTION 

I would like to say just a little, before I conclude, with re- 
lation to the actual saving that, in my judgment, could be 
obtained, assuming that an effort were made to bring about 
the concentration of production and the concentration of pri- 
mary-distribution system in the area of Greater New York; 
that is, an area including the Jersey shore a little beyond the 
Hackensack River. The total saving in investment that could 
be worked out over a period of relatively few years, based on 
the experience that we have had in Chicago, would amount to 
about $18,000,000 to $20,000,000. That is in investment alone. 
The saving in operating expenses would amount to about 
$1,000,000 a year. Now, figuring fixed charges of 5 per cent 
for depreciation and 5 per cent for interest on the saving in in- 
vestment, and adding to that the saving in operating expense, 
you have a sum almost equal to $3,000,000. That sum, cap- 
italized at 5 per cent, means a creation of $60,000,000 of 
value. 

At the rate of progress now going on in the neighborhood 
of New York the business is bound to double inside of ten 
years. If the present scheme is followed out if the traction 
companies have their own separate sources of supply; if the 
electric-light-and-power companies have their own separate 
sources of supply; if the steam railroads that are apparently on 
the threshold of electrification have their own sources of 
supply at the end of ten years the waste in money which 
will have taken place, on a 5 per cent basis, will be somewhere 
between $140,000,000 and $175,000,000. The direct saving 
by a concentrated system of generation and primary distribu- 
tion, leaving out of consideration altogether the saving in 
operating expenses, is of itself, in my opinion, sufficient to pro- 
vide the necessary funds for that portion of steam-railroad 
electrification centering in New York. That is, assuming the 
steam-railroad requirements as about 170,000 kw. I do not 
believe that the portion of combined generating stations and 



RAILROAD ELECTRIFICATION 293 

combined primary distribution system for that purpose would 
cost much over $100 to $110 a kilowatt, taking it on the basis 
of a combined system. 

The figures which my engineers have prepared indicate that 
if there should be made a systematic effort at massing produc- 
tion and massing primary distribution in the area referred to, 
the amount of property that would be realized or made available 
for increased business would be worth $18,000,000, or there- 
about. I do not think that the energy necessary for the steam 
railroads centering in New York and the primary system nec- 
essary to take that energy to the railroads would cost over 
$18,000,000. 

Now the savings are here at your feet. The engineering 
representatives of the interests that have these various public 
services in charge are most of them members of the Institute, 
and they can check up the figures. I will not attempt to bur- 
den the Institute records with the details, but they are at the 
disposal of anybody who wants to use them. I am speaking 
not from any theoretical point of view, but from my own knowl- 
edge and experience in developing the business which it is my 
pride to preside over. I know that the change that I have been 
able to work there, from barely earning dividends to putting the 
property in a strong, conservative position, has been the result 
of following the policy that I have laid down here, and I urge 
the people who are interested to try to follow it out around New 
York. It is a policy that is worthy of the greatest engineers 
and worthy of the thought of the greatest financiers in this 
country. It is a conservation of the truest order. If the same 
policy is carried out throughout the United States, the conser- 
vation of fuel will be something tremendous and the conser- 
vation of labor will be something tremendous. The letting loose 
of capital that can be used in other directions will stimulate 
business. 

There is no greater problem in the industrial world today, 
no problem that presents greater opportunities for the engineers 
to achieve distinction, no problem that presents greater oppor- 
tunities for the financier to achieve distinction and profit, than 



294 ADDRESSES OF SAMUEL INSULL 

the proper method of producing energy and distributing it in 
a given area; and involved in that question is the solution of 
the providing of money for that portion of the electrification 
of steam railroads that ends when the energy is put into the 
track. 

Before concluding, I think it is but fair to my own staff that 
I should say that it would have been impossible for me to 
present this paper if it had not been for the loyal and valued 
assistance rendered me for three months in preparing data for 
this discussion, under the direction of Mr. Peter Junkersfeld, 
of the Commonwealth Edison Company, and the close personal 
work of Mr. Fowler, our chief statistician; Mr. Gear, our en- 
gineer of distribution, and Mr. Bird, one of the engineers of 
our contract department. The gentlemen whom I have men- 
tioned have worked so hard on this matter, and given so much 
of their time to it, that it is only due to them that I should make 
this statement. 



APPENDIX 
ELECTRIC POWER REQUIREMENTS OF CHICAGO STEAM RAIL- 

ROADS ELECTRIFIED 1911-1912 
PBEPAEED BY PAUL BIRD, H. B. GEAR AND E. J. FOWLER 

ELECTRICAL REQUIREMENTS OF FREIGHT SERVICE ON ELECTRIFIED STEAM 

RAILROADS IN CHICAGO DISTRICT COMPUTATIONS MADE 

IN MARCH, 1912 

The electrical requirements of the freight service of Chicago have been 
worked out for the same zone that is being considered by the Chicago Associa- 
tion of Commerce Committee on Smoke Abatement and Electrification of 
Railway Terminals. 

The computations cover the year from July, 1911, to June, 1912, and it is 
assumed that the steam railroads in this district are electrified with no changes 
in the tracks and yards, and that freight is handled through the city in the same 
manner and following the same routes as it does today. 

When the railroads are actually electrified there is no question but that 
great changes will be made in the freight terminals, and that a large part of the 
freight that now comes through the heart of the city will pass around and 
outside the city limits and possibly outside the electrified zone. 

The results of the investigation are: 



RAILROAD ELECTRIFICATION 



295 



Month 



Maximum 
demand 



Kw-hr. 



Load factor 
Per cent 



July, 1911 

August 

September 

October 

November 

December 

January, 1912 

February 

March 

April '. 

May 

June 



55,200 
63,800 
68,700 
71,200 
78,000 
74,200 
68,200 
70,200 
70,000 
62,500 
60,400 
60,300 



28,814,400 
33,303,600 
34,624,800 
37,636,200 
39,312,000 
38,732,400 
35,600,400 
32,853,600 
36,540,000 
31,500,000 
31,528,800 
30,391,000 



70.3 

69.6 

70.3 

70.2 

70 

70.3 

70.3 

69.7 

70.3 

70.1 

70.2 

70 



410,837,200 



The maximum demands and the consumption for December, the month 
during which the railway maximum demand would occur, are as follows: 

DECEMBER FREIGHT REQUIREMENTS 

Maximum 

Railroads ,. demand Kw-hr. 

Wabash R. R 1611 840,900 

C. I. & L. R. R. (Monon) 736 384,200 

L. S. & M. S. Ry 3244 1,693,400 

N. Y. C. & St. L. R. R. (Nickel Plate) 1033 539,200 

P. Ft. W. & C. Ry 3352 1,749,700 

B. & O. R. R 1713 894,200 

M. C. R. R 2878 1,502,300 

Erie R. R 1680 877,000 

P. C. C. & St. L. R. R 2091 1,091,500 

Chicago Great Western Ry 1124 586,700 

Northwestern Ry 7605 3,969,800 

Rock Island Ry 2520 1,315,400 

C. B. & Q. R. R 5098 2,661,200 

St. Paul R. R 4127 2,154,300 

111. Central R. R 4377 2,284,800 

Santa Fe R. R 913 476,600 

C. & A. Ry 1572 820,600 

C. & E. I. R. R 3193 1,666,700 

Grand Trunk R. R 1201 626,900 

Wise. Central (M. S. P. & S. S. M.) 1256 655,600 

C. & O. of Indiana 110 57,400 

Chicago & Indiana Southern 148 77,300 

Pere Marquette 368 192,100 

Chicago & Western Indiana 967 504,800 

B. & O. C. T. R. R 2390 1,247,600 

C. Junction R. R 4682 2,444,000 

E. J. & E. Ry. (C. L. & S. E. R. R.) 3845 2,007,100 

Belt Ry 7071 3,691,100 

Chicago, West Pullman & Southern Ry 710 370,600 

111. Northern 423 220,800 

Manufacturers Junction 171 89,300 

Misc. Belt Roads 1991 1.039,300 

Total 74,200 38,732,400 

Methods and Data Used in Making Computations. From the Chicago 
Association of Commerce committee, a list was obtained of the number of steam 
locomotives used within the Chicago city limits in October, 1911. This list, 
showing the number of locomotives and locomotive-hours in each class of serv- 
ice, was as follows: 

Number of Working hours 

Service locomotives per day 

Through freight 361 812 

Switching 560 7223 

Transfer 182 2378 

Through passenger 336 801 

Suburban passenger 200 1000 



296 



ADDRESSES OF SAMUEL INSULL 



An estimate was made of the coal consumption per working hour of each 
class of freight locomotive, and from the coal burned in the city limits per day 
the necessary electrical requirements for the same service were computed. 



OCTOBER, 1911 CITY LIMITS 





Through 
freight 


Switching 


Transfer 


Total 


Number of locomotives 
Number of working hours per day 
* Lb. of coal per locomotive per hour . . 
Tons of coal per day 


361 
812 
2,000 
812 


560 
7,223 
600 
2 196 


182 
2,378 
1,350 
1 602 


1,103 
10,413 

4 eio 


Lb. of coal per hour 


67 670 


182 083 


133 500 


384 253 


* Lb. of coal per hour per locomotive 
drawbar horse-power 
* Efficiency (from drawbar to power 
house) 


10 

60% 


12 

60% 


10 

60% 




Average electrical load in kw 
* Watt-hours per ton-mile .... 


8,675 
31 


19,072 
120 


16,473 
56 


44,220 


Ton-miles per day 


6 767 000 


3 821 814 


7 036 610 


17 625 424 













* Assumption. 

The pounds of coal per locomotive per working hour were assumed as 
shown above after consulting with several Chicago railroad men. The tons of 
coal per day obtained in this way check very closely with similar figures pub- 
lished in the 1911 report of the Chicago Smoke Department, which figures 
were obtained directly from the railroad companies. 

The pounds of coal per hour per drawbar horse-power was assumed after 
discussing the subject with a prominent engineer of one of the large trunk-line 
railroads. As a result of many actual tests he found that his road used about 
eight pounds of eastern coal per drawbar horse-power. Correcting this figure 
for the difference in the heat value of the coal, the above figures were obtained 
for Chicago. 

The efficiency of 60 per cent between the locomotive drawbar and the 
electrical power house was also chosen after discussing the matter with the 
same engineer. This takes into account the losses in the line, the transformers, 
and in the motors and gears of the electric locomotive. 

The " watt-hour-per-ton-mile " figures are in accordance with results ob- 
tained on several electrified roads. 

Having thus obtained the average power-house load in kilowatts for the 
city limits and the month of October, 1911, the following steps were taken: 

1. The average load of 44,220 kw. was apportioned among the various 
railroads operating in the city. 

2. The results were increased, so as to apply to the Chicago Association of 
Commerce Electric Zone instead of the city limits. 

3. A study was made of the movement of freight cars during the different 
hours of the day, and the different months of the year. The increased traction 
on account of cold weather was also considered. The daily, monthly and 
yearly load factors were thus obtained. 

4. The maximum demand and consumption was then computed for each 
railroad and each month of the year. 

5. The results were checked in various ways. 

Apportionment of Total Average Load among the Railroads. The total 
average load was found to be 44,220 kw. for October and within the city limits. 
This was divided amongst the different railroads in accordance with the coal 
consumed by their freight engines as given in the Smoke Department report of 
1911. 



RAILROAD ELECTRIFICATION 



297 



Increase of Figures to Cover Association of Commerce Electric Zone. A 
statement of the track mileage of all railroads for the city limits and for the 
zone, was obtained from the Association of Commerce committee. With this 
as a basis, and from a careful study of the map, the figures of average electrical 
load were increased to cover everything within the zone. The average increase 
in load was 22 per cent. 

The following table gives the average load in kw. for October, for the area 
within the city limits and also for the area within the Electric Zone. 

Load Factors, etc. A daily load factor of 75 per cent was assumed for the 
entire freight business of the Chicago district. Mr. L. C. Fritch (now chief 
engineer of the Chicago Great Western R. R.) investigated the subject of 
electrification of the Chicago terminal of the Illinois Central R. R. in 1909. 
He, of course, had access to all the records of the railroad and his load curves 
for the freight service show a load factor of 75 per cent. The subject of the 
movement of freight cars through Chicago was also discussed with several 
railroad officials connected with roads which are among the largest handlers of 
freight in the city, and from the information thus obtained, it seems certain 
that this figure is about right. 

Average load in kilowatts, October, 1911, 54,000. 

Maximum kilowatts, October, 1911 (75 per cent load factor), 72,100. 



FREIGHT SERVICE 
AVERAGE LOAD IN KILOWATTS, OCTOBER, 1911 



Railroad 



City 
limits 



Per cent 
increase 



Electric 
Zone 



Maximum 

kilowatts 

75 per cent 

load factor 



Wabash R. R 980 

C. I. & L. R. R 460 

L. S. & M. S. Ry 1890 

N. Y. C. & St. L. R. R 620 

P. Ft. W. & C. Ry 1950 

B. &O. R. R 830 

M. C. R. R 1740 

Erie R. R 1020 

P. C. C. & St. L. R. R 1320 

C. Great Western Ry 750 

Northwestern Ry 4430 

Rock Island Ry 1530 

C. B. & Q. R. R 2970 

St. Paul R. R 2500 

111. Central R. R 2900 

Santa Fe Ry 580 

C. & A. Ry 1000 

C. & E. I. R. R 1940 

Grand Trunk 700 

Wise. Central 450 

C. & O. of Indiana 80 

Chicago & Ind. Southern 100 

Pere Marquette 230 

Chi. & Western Ind 640 

B. & O. C. T. R. R 900 

C. Junction 3400 

E. J. &E. Ry 1400 

Belt Ry 4900 

Ch. W. Pullman & Southern 500 

111. Northern 300 

Mfg. Junction 100 

Misc. Belt Roads 1100 

Total . . 44,220 



20 
15 
25 
20 
25 
50 
20 
20 
15 
10 
25 
20 
25 
20 
10 
15 
15 
20 
25 

100 
15 
15 
15 
10 

100 


100 
5 
10 
10 
25 
25 



1180 

530 

2370 

760 

2403 

1240 

2080 

1220 

1520 

820 

5550 

1840 

3720 

3000 

3180 

670 

1150 

2330 

870 

900 

90 

110 

260 

700 

1800 

3400 

2800 

5140 

550 

330 

120 

1380 



1570 

710 

3150 

1010 

3250 

1660 

2790 

1630 

2030 

1090 

7400 

2450 

4950 

4010 

4250 

890 

1530 

3100 

1160 

1200 

100 

140 

350 

930 

2350 

4550 

3730 

6870 

700 

420 

160 

1940 



54,000 



72,100 



298 



ADDRESSES OF SAMUEL INSULL 



In order to get at the variation in the freight business throughout the year, 
the freight earnings of several of the principal railroads were plotted as shown 
in Fig. 20. The ratios obtained in this manner were used in getting the max- 
imum kilowatts for each month of the year. 

It was then decided to add to the maximum kilowatts of the winter months, 
the following percentages to take care of increased traction due to cold. 



Month 
November 
December . 
January . . 
February . 
March .... 
April 



Per cent added 

on account of cold 

10 

20 

20 

20 

15 

5 



In getting at the monthly kilowatt-hours, the Sunday requirements were 
assumed to be one-half of week-day requirements and four Sundays were 
used per month. 

The following table shows the maximum kilowatt, the kilowatt-hour, and 
load factors for each month in the year. 



FREIGHT ELECTRICAL REQUIREMENTS CHICAGO 





Per cent 
of aver- 
age daily 
earnings 
for 
October 


Maximum kilowatts 


Kw-hr. 


Load 
factors 

Per 
cent 


Normal 
require- 
ments 


Additional 
on account of cold 


Total 
maximum 


Per cent 


Amount 


July, 1911 


76.5 
88.5 
95.3 
100 
98.4 
85.7 
78.9 
81.1 
84.4 
81.3 
83.8 
83.6 


55,200 
63,800 
68,700 
72,100 
70,900 
61,800 
56,800 
58,500 
60,900 
58,600 
60,400 
60,300 


io 

20 
20 
20 
15 
5 


7, 100 
12,400 
11,400 
11,700 
9,100 
3,900 


55,200 
63,800 
68,700 
72,100 
78,000 
74,200 
68,200 
70,200 
70,000 
62,500 
60,400 
60,300 


28,814,400 
33,303,600 
34,624,800 
37,636,200 
39,312,000 
38,732,400 
35,600,400 
32,853,600 
36,540,000 
31,500,000 
31,528,800 
30,391,000 


70.3 
69.6 
70.3 
70.2 
70 
70.3 
70.3 
69.7 
70.3 
70.1 
70.2 
70 


September .... 
October 


November .... 
December .... 
January, 1912 
February 
March 
April 
May 
June 




410,837,200 



Average monthly load factor 

Annual load factor. . . 



70.1 
60.1 



Normal maximum kilowatts assumed proportional to earnings. 

Load factor for week day assumed at 75 per cent. 

Sunday requirements % of week day, assuming four Sundays to month 

Ratio of Passenger to Freight Loads. 

Total kw. hr. per year, passenger 183,452,500 or 31 per cent 

Total kw. hr. per year, freight 410,837,200 or 69 per cent 

Total kw. hr. per year, passenger and freight 594,289,700 or 100 per cent 

The 1911 report of the Chicago Smoke Department gives the average daily 
coal used by railroad locomotives in city limits as follows: 

Tons of coal per day, passenger 1163 or 21 per cent 

Tons of coal per day, freight 4438 or 79 per cent 

Tons of coal per day, passenger and freight 5601 or 100 per cent 



RAILROAD ELECTRIFICATION 299 

This is a good check on the computations of the electrical energy required 
as to the proportion between passenger service and freight service, for it is to be 
expected that locomotives engaged in freight service operate less efficiently 
than passenger locomotives. 

Saving of Coal due to Electric Traction. The total electrical energy per year 
required by the electrified steam railroads of Chicago is: 

Passenger service 183,452,500 kw-hr. 

Freight 410,837,200 kw-hi. 



Total 594,289,700 kw-hr. 

At three Ib. of coal per kw-hr. the total coal per year in the power houses 
would be 891,000 tons. 

The 1911 report of the Chicago Smoke Department shows that the railroads 
burn in their steam locomotives about 1,850,000 tons of coal per year in the city 
limits. Increasing this figure by 22 per cent, it is seen that the railroads burn 
about 2,260,000 tons of coal per year in the electric zone. The ratio of the coal 
burned with electric operation to the coal burned with steam locomotives is 
1 to 2. 55. 

Mr. W. S. Murray, electrical engineer [1912] of the New York, New Haven 
& Hartford R. R., in a paper presented at the 1911 convention of the A. I. E. E. 
said: "It has been demonstrated that the ratio between the coal burned for 
operating passenger trains by electric rather than by steam locomotives is 1 
to 2. In the case of switching engines, this rate is much greater, a figure of 
1 to 3 being conservative." 

Tonnage of Freight Handled in Chicago. It is surprising to find how little 
information there is available on this subject. The railroads do not keep their 
records so that the tons or carloads of freight handled in the Chicago district 
may be obtained. Apparently the only record of any sort that was ever kept 
of the freight movements was in 1902 and 1903 when a committee of Chicago 
railroad officials made a report on the interchange of freight between the dif- 
ferent roads. This report was made with particular reference to the clearing 
yards of the Chicago Union Transfer Company. A copy of this report was 
borrowed from Mr. L. C. Fritch, and by means of it an estimate was made of 
the tonnage handled by the eighteen principal roads operating in Chicago. The 
figures given in this report cover the number of loaded and empty cars handled 
during the year ended June 30, 1903. To get at the tons of freight handled in 
the year ending June 30, 1912, the following assumptions were made: 

Weight of empty freight car 18 tons 

Weight of loaded freight car 40 tons 

Days per year 330 

Increase of freight business from 1903 to 1912 67 per cent 

The last figure was obtained by plotting a curve of the total ton-mileage of 
freight handled per year in the United States from 1902 to 1910. This informa- 
tion was obtained from Mr. Slason Thompson's bureau of railway statistics. 
From the data given in the 1903 report it was also possible to approximate the 
number of switching movements, transfer movements and "in or out" or 
through freight movements. 

After getting the number of tons of freight (including weights of cars) 
per day in each of these three classes of freight movement, by assuming the 



300 ADDRESSES OF SAMUEL INSULL 

average distance traveled in each class of movement, the ton-miles were ob- 
tained. The mileages assumed were: 

Through freight 7 miles 

Switching 2 miles 

Transfer 10 miles 

It may seem surprising that the average transfer haul is longer than the 
average in-or-out haul, but this is undoubtedly true. The list previously given 
shows 2,378 transfer locomotive-hours per day as against 812 through-freight 
locomotive-hours. 

Knowing the average ton-miles per hour and applying figures for "watt- 
hours per ton-mile," the average electrical load was obtained. The table on the 
opposite page shows the results of these computations. 

As the 1903 interchange report only covered the eighteen principal trunk- 
line railroads, the figures thus obtained serve only to check a part of the 
results arrived at by the other methods. 

REFERENCES 

Edward P. Burch. "Electric Traction for Railway Trains." 

L. C. Fritch, Chief Engineer Chicago Great Western R. R., formerly Consulting Engineer 

Illinois Central R. R. "Investigation on Proposed Electrification of Illinois Central 

Chicago Terminals, 1909." 
P. Junkersfeld. "Power Supply for Terminal Electrification of Railways Entering Chicago, 

1909." 
W. S. Murray, Electrical Engineer N. Y., New Haven & H. R. R. R. Proc. A. I. E. E. f 

June, 1911, "Electrification Analyzed." 
W. J. Wilgus, formerly with N. Y. Central & H. R. R. R. Paper, Am. Soc. Civil Engineers, 

1908. 

B. F. Wood, Asst. Engineer Pennsylvania R. R. Proc. A. I. E. E., June, 1911, "Opera- 
tion of West Jersey & Sea Shore, R. R. " Paper, The Altoona Railroad Club, March, 

1909, "Electric Traction." 

Department of Smoke Inspection, Chicago. Report of February, 1911. 
Report "Assembling and Interchange, Chicago, Illinois," by Committee of Railroad 

Officials, 1903. 

DETERMINATION OF ELECTRIC POWER REQUIRED TO OPERATE PASSENGER 
TRAINS AT CHICAGO TERMINALS 

General Plan. Observations were made on a mid-week day between 4 
and 5 p.m. as to the number and kind of cars making up each train entering 
and leaving each of the six passenger stations now in operation. 

At the Northwestern station and the Grand Central station these observa- 
tions were extended to include all trains entering and leaving the station 
throughout a twenty-four-hour period, these two being chosen as the ones 
representing the heaviest and lightest traffic, respectively. 

From the data secured by observations average weights of trains for the 
different classes of service were derived, and from these weights and the special 
time schedules prepared by the railroads for the use of their employees, the 
running time and average kilowatt demand for each train were calculated for 
all through trains for the entire twenty-four hours. Twenty-four-hour load 
curves were plotted from average weights of trains for the suburban service 
of the Northwestern and LaSalle Street stations, these stations being taken as 
typical of the suburban service of other stations. 

Through trains were considered as being operated by locomotives and 
suburban trains as being made up of multiple-unit cars similar to those used 
by the New York Central, with two trailers to three motor cars. From these 
train diagrams, load curves were derived for the rush hours from four to eight 
o'clock for the six terminal stations, the curve for through trains being de- 
termined separately from that of the suburban trains. 

From the observations taken in the other stations between 4 and 8 p.m. 
suburban load curves were plotted for those hours and a total curve for subur- 



RAILROAD ELECTRIFICATION 



301 



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H > ' 



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I 



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302 



ADDRESSES OF SAMUEL INSULL 



ban trains made up for the hours of 4 to 8 p.m., thus fixing the maximum for 
the suburban service at all stations. 

Having determined the ratio of the combined suburban curve of the North- 
western and LaSalle Street stations to the total suburban curve for the hours 
of 4 to 8 p.m., this ratio was applied to the Northwestern and LaSalle Street 
stations' suburban curve for the remainder of the twenty-four hours in order 
to get the total suburban load curve. 

Twenty per cent was added to the through-train load to allow for increased 
traction due to cold weather and fifty per cent to suburban train load for 



TOTAL LOAD CHICAGO THROUGH TRAINS 



Time 


Grand 
Central 


N. W. 


LaSalle 


Union 


Dearborn 


I. C. 


Total 
kw. 


A. M. 12:00 






1600 


1470 


2090 


1340 


6,500 


12:30 


360 




610 


1470 


340 


1180 


3,960 


1:00 


360 


.... 


610 








970 


1:30 






250 


'730 






980 


2:00 




. . . . 


1180 








1,180 


2:30 






1190 




'726 




1,910 


3:00 




'620 


1400 


1666 


590 


1490 


6,000 


3:30 








580 




1360 


1,940 


4:00 
















4:30 




iio 










'iio 


5:00 




140 


'ieo 








300 


5:30 












'556 


550 


6:00 


560 




1750 


'996 




550 


3,850 


6:30 


560 


liso 


3940 


4220 


2860 


1570 


14,330 


7:00 


280 


1760 


1760 


3540 


2640 


2710 


15,310 


7:30 


530 


2400 


4650 


3880 


2710 


2370 


16,540 


8:00 


1270 


1990 


3280 


3990 


940 


940 


12,410 


8:30 


1130 


3350 


4450 


2390 


810 


940 


13,070 


9:00 


1140 


3060 


3100 


3000 


3100 


390 


13,790 


9:30 




2750 


2620 


3330 


3300 


1680 


13,680 


10:00 


370 


2810 


1830 


4220 


750 


3280 


13,260 


10:30 


370 


1320 


3830 


2410 


1090 


2590 


11,610 


11:00 




3750 


3170 


1600 


1270 


1050 


10,840 


11:30 




1050 


1600 


2200 


1810 


540 


7,200 


p. M. 12:00 


310 


1050 


2280 


2060 


1950 


580 


8,230 


12:30 


580 


720 


1510 




2710 


570 


6,090 


1:00 


960 


560 


1930 


'766 


650 


1280 


6,080 


1:30 




2080 


1940 


1730 


540 


1200 


7,490 


2:00 




200 


1160 


1900 


540 




3,800 


2:30 




850 


2420 








3,270 


3:00 


470 


1250 


1580 


1670 


i7oo 


Ii20 


7,790 


3:30 




1650 


3000 


1380 


980 


560 


7,570 


4:00 


890 


930 


1240 


1880 


590 


450 


5,980 


4:30 


890 


1890 


2630 


2520 


1550 


2070 


11,550 


5:00 


730 


750 


3280 


2230 


1580 


930 


9,500 


5:30 


270 


1040 


4190 


3530 


1160 


930 


11,120 


6:00 


440 


750 


2530 


2730 


1300 


1530 


9,280 


6:30 


930 


3080 


630 


2490 




1530 


8,660 


7:00 


320 


2240 


1340 


.... 


'926 


1780 


6,600 


7:30 




460 


1300 


iseo 


590 


1860 


5,770 


8:00 




1010 


1660 


2350 


720 


1820 


7,560 


8:30 




3000 


2510 


3160 


1370 


1810 


11,850 


9:00 




1480 


3010 


1480 


2900 


1710 


10,580 


9:30 


840 




1860 


590 


2080 


1630 


7,000 


10:00 


870 


'eio 


940 


2950 


1140 


1660 


8,170 


10:30 


870 


1800 


1990 


3410 


870 


580 


9,520 


11:00 




1200 


980 


590 


510 




3,280 


11:30 


430 




2310 




1710 




4,450 


12:00 






1600 


1470 


2090 


1340 


6,500 



The above figures do not include the allowance for increased traction during winter 
months. 



RAILROAD ELECTRIFICATION 303 

increased traction and electric light and heating. From these increased values 
the load curve for the winter months was made up. 

The schedule of percentages of increase added during the fall and spring 
months for increased traction and heating which was used in connection with 
the freight power data, was applied to the passenger load curve for the purpose 
of determining the kilowatt-hour consumption for the different months of the 
year and the annual kilowatt-hour consumption. 

Train Weights. The weights of trains were calculated on the following 
basis: 

Locomotives 110 tons 

Baggage, express and combination cars 60 tons 

Day coaches 40 tons 

Ordinary Pullmans 62J3 tons 

Steel Pullmans 75 tons 

Diners 56 tons 

Trailer cars (suburban) 40 tons 

Method of Calculation. From the total weight of the train and the distance 
traveled in the zone the ton-miles were derived. For locomotive trains an 
energy consumption of 40 watt-hours per ton-mile was assumed; for the express 
run of suburban trains, 55 watt-hours per ton-mile, and for the local run of 
express and local trains, where stops are frequent, 120 watt-hours per ton-mile. 
From the kilowatt-hours used by the train and the elapsed time as figured 
from the time schedules, the average kilowatts required by the train during the 
time of its run was calculated. 

From the kilowatt demand of the trains the load curve was made up by the 
use of a train diagram showing the number of trains and the power taken by 
them at each half-hour interval except during the peak hours when the calcula- 
tions were made for each fifteen minutes. 

Fig. 22 shows how the through passenger load would vary throughout the 
year, making proper allowances for increased traction due to cold weather, also 
taking into account the variation in the amount of business done. It is assumed 
that the amount of energy required for the different months, exclusive of trac- 
tion due to cold, would differ from January by a percentage equal to one-half 
the per cent difference between the earnings for January and the other months 
of the year. 

Fig. 23 shows the suburban requirements of the year. The normal require- 
ments are assumed as constant, and the additional due to increased traction 
and heat are shown. 



SUMMARY ELECTRICAL REQUIREMENTS FOR PASSENGER SERVICE 

Normal Requirements. The suburban service is assumed the same as 
January throughout the year. Sundays, for the suburban service, are assumed 
to have 33^ per cent of week-day requirements. 

REQUIREMENTS OVER NORMAL 

Suburban and Through. 

Increased traction on Suburban Only, 

account of cold. Heat 

November 10 per cent 15 per cent 

December 20 per cent 30 per cent 

January 20 per cent 30 per cent 

February 20 per cent 30 per cent 

March 15 per cent 20 per cent 

April 5 per cent 10 per cent 



304 



ADDRESSES OF SAMUEL INSULL 





Daily earnings 
over January ex- 
pressed in per 
cent 


Coincident maximum kilowatts 


Through 


Suburban 


Light and power 
for depots, offices, 
shops, etc. 


Grand 
total 


July, 1911 
August 
September 
October 


12.6 
18.8 
17.6 
10.4 
5.9 
5.7 

'0.2 
0.3 
1.7 
2.6 

10.3 


11,490 
12,120 
12,000 
11,260 
11,880 
12,940 
12,240 
12,260 
11,760 
10,890 
10,470 
11,250 


37,310 
37,310 
37,310 
37,310 
46,640 
55,960 
55,960 
55,960 
50,370 
42,910 
37,310 
37,310 


3550 
3550 
4000 
4250 
4570 
4850 
4850 
4570 
4250 
4000 
3550 
3550 


52,3,30 
52,980 
53,310 
52,820 
63,090 
73,750 
73,750 
72,790 
66,380 
57,800 
51,330 
52.110 


November 
December 


January, 1912. . 
February. . . 


March 


April 


May 
June 





Kilowatt-hours 


Load 
factor 


Through 


Suburban 


Light and 
power per 
month 


Grand 


July, 1911 


6,633,600 
7,045,700 
6,743,500 
6,504,000 
6,680,000 
7,472,500 
7,116,800 
6,658,700 
6,795,500 
6,123,400 
6,085,000 
6,281,700 


5,679,200 
5,816,700 
5,611,400 
5,679,200 
7,014,300 
8,518,800 
8,725,100 
8,109,200 
7,666,900 
6,453,100 
5,816,700 
5,473,800 


1,850,200 
1,882,700 
1,836,500 
1,895,000 
1,895,000 
2,068,000 
2,104,200 
1,816,600 
1,895,000 
1,836,500 
1,882,700 
1,785,300 


14,163,000 
14,745,100 
14,191,400 
14,078,200 
15,589,300 
18,059,300 
17,946,100 
16,584,500 
16,357,400 
14,413,000 
13,784,400 
13,540,800 


36.4% 
37.4% 
36.9% 
35.8% 
34.3% 
32.8% 
32.9% 
32.7% 
33.1% 
34.6% 
36 % 
36.1% 


September .... 
October 
November. . . . 
December. . . . 
January, 1912. 
February 
March 
April 
May 


June 

Total 


80,140,400 


80,564,400 


22,747,700 


183,452,500 


28 . 3% 



Through-train requirements for different months were obtained by increas- 
ing the January figures by one-half the excess of the daily passenger earnings 
of those months. Sunday, for through trains, is taken as 80 per cent of a week- 
day. 

The energy required for light and power for depots, offices, shops, etc., 
battery charging and operating switches is assumed at 5000 kw. maximum 
and 50 per cent annual load factor. 

CALCULATION OF TRANSMISSION AND CONVERSION SYSTEM FOR PASSENGER 
AND FREIGHT LOADS 

To determine the location and size of substations required for the supply 
of the third-rail system, the positions of all passenger trains which will be 
operating in the Electric Zone at 6 :05 p.m., the time of the evening peak, were 
indicated upon a railroad map at Chicago, these positions being determined 
from the train schedules. No train schedules were available for freight trains, 
and it was therefore necessary to locate these on the map in amounts approx- 
imately equal to the demand of a single train, chiefly near the freight yards 
where switching is the heaviest, a few trains being located along the main line. 

Two general plans of power supply were assumed, (a) based on the installa- 
tion of a separate power system for each road or group of roads using the same 
tracks or operating under allied financial interests, and (b) based upon the 
entire power supply being operated as a unified system, the energy being derived 
from the nearest station of the Commonwealth Edison Company or the Public 



RAILROAD ELECTRIFICATION 305 

Service Company of Northern Illinois, and all stations being used to supply 
all the roads which came within an economical radius thereof. 

The position of substations was then fixed by allowing a distance of four to 
five miles apart on the larger roads and six miles apart on the smaller ones. 

In scheme (a) where operation is contemplated by groups, power houses 
were located at points where condensing water was available where it was 
possible to secure such sites within a reasonable distance of the railroad com- 
pany's tracks. 

However, in the smaller system where the loads were from 5,000 to 10,000 
kw. this was not entirely feasible, and sites were selected in some cases with 
reference to the distribution of the load. 

In selecting the rating for generating stations under group operation, it 
was considered that from 50 per cent to 75 per cent surplus would be re- 
quired to take care of swings in the load and provide suitable reserve. 

Fig. 25 shows swings of nearly 100 per cent over one-hour maximum for 
New York, New Haven & Hartford Cos Cob station. 

Transmission lines were laid out on a basis of a line for each 3000 kw. of load 
with a reserve line for each substation. The reserve supply was secured in the 
smaller substations by using one line with taps to two or three substations. 

In the plan for unified power supply it was assumed that the present 600- volt 
substations of the surface and elevated roads would be available, when increased 
in size, as sources of 600- volt supply for all roads coming within an economical 
range of their distribution, and the necessary number of additional lines to 
these substations to supply the steam-railroad load is included in the estimates. 

It is assumed that transmission lines would be run overhead along the rail- 
road company's right-of-way in the outlying portions of the city where steel- 
pole construction of a substantial character could be employed. Wherever 
lines were run on public streets it was assumed that they would be carried 
underground. 

SUMMARY OF RESULTS 

Under a unified plan of power supply, only 21 additional substations would 
have to be established, and the total number would be only 43 as compared 
with 72 substations under group operation. 

The number of transmission lines under the unified plan would be 81 as 
compared with 132 under group operation, and there would be over 2.5 times 
the length of line required for group operation as compared with the unified 
plan. 

The data for the unified plan are as follows: 

Number of substations 43 

Number of lines 81 

Rating of substations, kw 205,000 

Rating of generating stations, kw 142,000 

Length of lines, feet 1,390,000 

The data for group operation appear in the table on the next page. 

A comparison of the investment necessary for unified power supply, as 
compared with a separate supply for each road or group of roads, shows the 
following saving in favor of unified power supply: 

Power-house rating 99,500 kw. 

Substation rating 39,500 kw. 

Transmission-line cables in feet 2,283,000 kw. 

In addition to this saving, there is a corresponding saving in conduit con- 
struction, where the lines are underground, and in pole-line construction, where 
the lines are overhead. 



306 



ADDRESSES OF SAMUEL INSULL 



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n <N 10 co" ' 



p 
fi '* : * |* Ic 

5rfa>s2-j52 

d <^ rf-* si * ^ 



i. 

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j 14 









RAILROAD ELECTRIFICATION 



307 



There is also a corresponding, and possibly even greater, saving in the 
600-volt feeder, cable and conduit or pole lines. 

It must also be borne in mind that where the stations and substations are of 
larger average size, the investment per kilowatt is less than where the same load 
is distributed over a larger number of stations and substations. This same 
principle applies to transmission and distribution cable and conduit, and pole 
lines. 

Also the same principle applies, to fully as great an extent, to the operating 
and maintenance cost of stations, substations and lines. 

SUMMARY 
TOTAL ELECTRICAL REQUIREMENTS ALL STEAM ROADS 





Load at time of monthly maximum demand 


Freight 


Passenger 


Total 


July 1911 


54,250 
62,700 
67,500 
70,900 
76,700 
73,000 
67,000 
69,000 
68,800 
61,400 
59,400 
59,300 


52,350 
52,980 
53,310 
52,820 
63,090 
73,750 
73,020 
72,790 
66,380 
57,800 
51,330 
52,110 


106,600 
115,680 
120,810 
123,720 
139,790 
146,750 
140,020 
141,790 
135,180 
119,200 
110,730 
111,410 


August 


September 


October 


November 


December 


January, 1912 
February 


March 
April 


May 
June 







Kiiowatt-hours 








Freight 


Passenger 


Total 


factor 


July, 1911 
August 


28,814,400 
33,303,600 


14,163,000 
14,745,100 


42,977,400 
48,048,700 


54.3% 
55 8% 


September 
October 


34,624,800 
37 636 200 


14,191,400 
14 078 200 


48,816,200 
51 714 400 


56.2% 
56 4% 


November 
December 


39,312,000 
38 732 400 


15,589,300 
18 059 300 


54,901,300 
56 79 1 700 


54: 7% 
52 % 


January, 1912 


35,600,400 


17,946,100 


53,546 500 


51 5% 


February . 


32 853 600 


16 584 500 


49 438 100 


51 8% 


March 


36,540,000 


16,357,400 


52 897,400 


52 5% 


April 


31 500 000 


14 413 000 


45 913 000 


53 4% 


May 


31 528 800 


13 784 400 


45 313 200 


55 % 


June 


30 391 000 


13 540 800 


43 931 800 


55 % 












Total 


410,837,200 


1 83,452,500 


594,289,700 


46.2% 



DISCUSSION FOLLOWING THE ADDRESS ON 

"THE RELATION OF CENTRAL-STATION 

GENERATION TO RAILROAD 

ELECTRIFICATION " 

ATER Mr. Insull had made his address of April 5, 1912, 
before the American Institute of Electrical Engineers 
in New York, on "The Relation of Central-Station 
Generation to Railroad Electrification," as reprinted in the 
preceding chapter, an interesting discussion ensued. Some of 
the principal points brought out are given here 1 in brief. 

JOHN W. LIEB, JR., of the New York Edison Company, the 
first speaker to follow Mr. Insull, said, in effect, that the In- 
stitute had had too few fundamental papers of this character. 
He said that he believed the economic possibilities of the situa- 
tion would have an important bearing on the engineering ques- 
tions of varying frequencies and systems. He believed that 
every member was under deep obligation to Mr. Insull for his 
important address. 

DUGALD C. JACKSON, professor in Massachusetts Institute 
of Technology, Boston, declared that a presentation of this 
kind must go far toward bringing economic views and en- 
gineering views into harmony. 

WILLIAM S. MURRAY, then electrical engineer of the New 
York, New Haven and Hartford Railroad, said that, speaking 
as a railroad man, he regarded the paper as "a new light al- 
most a light in the darkness." 

CHARLES P. STEINMETZ, consulting engineer for the General 
Electric Company, Schenectady, N. Y., said that the paper 

1. The discussion is given in greater detail in the Transactions of the 
American Institute of Electrical Engineers, Part I of Vol. XXXI, p. 283 
et seq. 

308 



ELECTRIFICATION DISCUSSED 309 

announces the approach of a new era in the electrical industry. 
Dr. Steinmetz also made the point that concentration of 
electrical production and primary distribution permits the 
utilization of a diversity factor in engineering talent. No 
small system or utility employing electricity can hope to em- 
ploy the high grade of engineering advice obtainable by the 
great electricity-supply system. 

LEWIS B. STILLWELL, consulting engineer, New York, made 
the comment that the advantages that accrue from the utiliza- 
tion of the diversity factor decrease rather rapidly as the size 
of the individual aggregated plants increases. The speaker 
noted the fact that within eight years the improvement in 
prime movers had been such that a saving in coal amounting 
to about 30 per cent had been brought about. That is a factor 
that assists materially in carrying out the general idea of cen- 
tralization.- 

C. A. COFFIN, president of the General Electric Company, 
Schenectady, N. Y., paid a brief tribute to the work of men 
like Mr. Insull, Mr. Sprague and others. 

BENJAMIN F. WOOD, of the Pennsylvania Railroad, Altoona, 
Pa., said that the generating station and other electrical equip- 
ment of his company at the New York terminal represented 
an expenditure of about $8,000,000. Half of this would have 
been saved if electrical energy had been purchased. Further, 
if the energy could have been purchased at the rates prevail- 
ing in Chicago, the company could have paid a dividend of 
about 6 per cent on the other $4,000,000. "We are not the 
guilty one," declared Mr. Wood. 

CARY T. HUTCHINSON, consulting engineer, New York, 
discussed the cost of producing electrical energy in Chicago. 
He had a colloquy with Mr. Insull on the subject. Dr. 
Hutchinson said in conclusion that the whole point, in spite 
of the saving in cost of production, was the price to the user. 

BION J. ARNOLD, consulting engineer, Chicago, after 
mentioning the fact that the Commonwealth Edison Company 
possessed one of the most economical plants in the world for the 
production of electrical energy, dwelt on the large and well 



310 ADDRESSES OF SAMUEL INSULL 

managed plant's ability to discard obsolete machinery, being 
able to stand the obsolescence loss. The speaker also dis- 
cussed the thermal efficiency of generating stations, and said 
that after 10,000-kilowatt units have been reached the thermal 
efficiency remains nearly constant. Referring to the New York 
Central Railroad's generating stations near New York, de- 
signed eight or nine years before, Mr. Arnold made the point 
that what might be regarded as errors now in relation to the 
economics of electricity supply were not errors then. Mr. 
Arnold expressed himself as in sympathy with Mr. Insull's 
policies. 

FRANK J. SPRAGUE, consulting engineer, New York, alluded 
to the very great importance of increasing the efficiency of 
power production. He looks forward to the time when a com- 
paratively few great central stations will replace the thousands 
of small plants of today. He mentioned the waste of water in 
a large city like New York, due to the number of small non- 
condensing steam-engine plants. He extended his personal 
thanks to Mr. Insull for an epoch-making paper. 

OPPOSITION TO ECONOMIC WASTE 

MR. INSULL (after discussing with Mr. Stillwell a tentative 
question of long-distance power supply and closing the discus- 
sion) : I did not come down here to discuss the cost and selling 
price of the Commonwealth Edison Company's commodity. 
I am not here to sell my own goods. I do not need to make any 
answer as to whether my prices are high or low, except to take 
the exact statement made by Mr. Wood as to what would have 
been the advantage to the Pennsylvania Railroad if it had pur- 
chased energy on the same basis on which I am selling it in 
Chicago. If you will refer to some of your older records you 
will find, also, that Mr. Wood made practically the same state- 
ment with reference to the West Jersey and Seashore Railroad. 

I was dealing with the matter on a broad basis. Probably 
outside of the very large traction companies in Chicago, I am 
one of the largest purchasers of energy in this country. In 
other words, I take a dose of my own medicine. 



ELECTRIFICATION DISCUSSED 311 

Of course, in dealing with the situation I have naturally 
had to refer to New York. It is the subject uppermost in 
the minds of you people. So, of course, I took New York 
as the basis of my figuring and compared it with the results 
we have obtained in Chicago. But it matters not to me who 
is the owner of the generating plant and the primary trans- 
mission system. I do not care whether it is the local lighting 
company, whether it is the local railway company, or whether 
it is the steam-railroad company; the principle is the thing I am 
contending for. I am contending against economic waste. 
When I speak of "purchased power" I simply use that term 
because it has come to be used in the industry as designating a 
difference between making your own power and buying it from 
some one else. I say again that I think it would be a great 
misfortune if, as the result of this meeting, or as the result of the 
agitation that is going on throughout the industry on this sub- 
ject, some move is not made with reference to the concentra- 
tion of the manufacture and primary distribution of electricity. 
I think one is almost as important as the other. 

LIMITS OF ECONOMICAL PRODUCTION NOT REACHED 

There are some other serious questions of an engineering 
character to be decided within the next year or two on this 
subject. I do not know at this time what the limit of size of 
unit is that will show the greatest efficiency. I have con- 
sulted the best experts I can find on both sides of the ocean. 
The question of size of unit comes in very much in this question 
of concentration of production of energy. I do not think we 
have by any means reached the economical limits of the cost of 
production. I do not think it is possible for any ordinary 
public-service company, by itself, doing just purely its own 
business, to take advantage of the economical limit when we 
reach it. I think it can only be done by an aggregation of 
companies. 

There are a good many things we can learn to advantage 
from our neighbors. I have been for a good many years in 
the habit of sending my engineers to Europe to see what they 



312 ADDRESSES OF SAMUEL INSULL 

can find out. We find that we get full value for the expense of 
the trips. I do not know of any case on the other side where 
steam-railroad electrification on any considerable scale has 
been started and the railroad companies have built their own 
generating stations. They go a great deal deeper into the 
economies of things than we do in this country. We make 
money easier here; we have greater markets. We can take a 
lesson from their experience. 

I make one suggestion to the Railway Committee of the 
Institute. Take the remarkable situation you have here on the 
Atlantic seaboard, with great density of population in the small 
amount of territory between Philadelphia and Boston. Take 
Philadelphia, New York and Boston, nuclei of areas stretching 
out as three fans; take places like the Connecticut manufactur- 
ing towns; go along the Boston and Albany Railroad to Al- 
bany, and then cross New Jersey, through Pennsylvania to the 
south of Philadelphia. Figure out the money that can be 
saved by putting all the generation of electricity in that ter- 
ritory under one ownership. I do not care who owns the generat- 
ing plant, whether it is the railroad company or the lighting 
company or the traction company; but I venture to say that 
the amount of money you would save would not only be suf- 
ficient to build the transmission lines and the generating sta- 
tions of steam railroads in that territory, but I think it would 
go a long way toward equipping the railroads themselves. 

DISCUSSION AT BOSTON ON JUNE 26 AND 27, 1912 1 

FRANK J. SPRAGUE explained how Mr. Insull's address to 
the Institute came to be made. He told something about the 
electrification agitation in Chicago and advocated the creation 
of an independent financial organization to stand between the 
electrical manufacturing companies and the railroad companies 
in electrification enterprises. 

H. G. STOTT, superintendent of motive power of Inter- 

1. At the suggestion of Mr. Sprague, discussion of Mr. Insull's paper was 
resumed at the annual convention of the Institute. 



ELECTRIFICATION DISCUSSED 313 

borough Rapid Transit Company, New York, contended that 
Mr. Insull's results in Chicago were obtained not by combining 
first-class plants but by combining in one or two plants the 
output from a number of practically broken-down plants 
plants ripe for reconstruction. Mr. Stott took issue with Mr. 
Insull on the question of concentrating production of large, 
modern plants. He thought that an ideal solution would be 
for each company to retain its own plant, thereby preserving its 
equity, with an agreement by which each plant should supply 
all power within its own zone of economical distribution. 

WILLIAM MCCLELLAN, New York, thought that there 
should be no jumping at conclusions in the matter of utilizing 
the diversity factor in proposed railroad electrifications. 

PERCY H. THOMAS, consulting engineer, New York, pointed 
out that the trend has been toward centralization since the 
electrical industry came into being. 

W. G. CARLTON, superintendent of power, electrical divi- 
sion, New York Central Railroad, New York, suggested the 
possibility of "pooling" generating stations. 

CALVERT TOWNLEY, Westinghouse Electric and Manufac- 
turing Company, New York, said that he realized the benefits 
of concentration, but realized also that the principle had 
limitations. 

W. S. LEE, Southern Power Company, Charlotte, N. C., 
held that there should be large generating-plant units in dif- 
ferent parts of the area so placed that each should carry ap- 
proximately its own load, being at the same time interconnected 
with the others, so that one plant could help out another. 

MR. SPRAGUE said that of course concentration should not 
be carried to an absurd or unsafe extreme, as, for instance, one 
generating station for a city like New York or Chicago. 

WILLIAM S. MURRAY explained why the cost of generating 
energy in the Cos Cob station of the New York, New Haven 
and Hartford Railroad was comparatively high at that time. 

WILLIAM B. JACKSON, consulting engineer, Chicago, drew 
attention to the fact that the electrification of railroads is only 
one factor entering into the discussion of Mr. Insull's subject. 



314 ADDRESSES OF SAMUEL INSULL 

No one could take exception to the principle of the paper. 
The possibilities of unified generation and transmission of elec- 
trical energy are very great. 

LEE H. PARKER, Stone & Webster Engineering Corporation, 
Boston, said that he did not see any reason why the com- 
paratively small amount of energy required for the proposed 
electrified railroads in and near Boston should not be supplied 
by any one of the large energy-generating companies in ex- 
istence in Boston. 

C. O. MAILLOUX, consulting engineer, New York, remarked 
that, from one point of view, it might be well for both the spec- 
ialist in the production of electrical energy and the specialist in 
transportation to stick to his specialty. But circumstances 
may alter cases. Financially, it may be important in launch- 
ing, say, a traction project if the capital required for the gener- 
ating plant can be omitted from the total investment. Even 
if the man interested in the project could raise the capital, it 
might be an advantage or a convenience not to do so. Refer- 
ring specifically to the paper, Mr. Mailloux declared that it is 
a great advantage to have the possibility of studying the mod- 
ern conditions of the supply of electrical energy without being 
compelled to go into that business. 

P. W. SOTHMAN, New York, gave it as his opinion that 
railway and commercial loads might well be combined. Each 
case must be studied on its merits, however. 

C. L. DE MURALT, New York, among other things, said: 
"I can easily conceive of his [Mr. Insull's] having in mind 
the supplying of all of the United States from one single net- 
work of lines, controlled by one company, which owns all 
sorts of power stations in the most convenient places steam, 
hydraulic, etc. and I do not doubt for one moment that the 
country would benefit by such a combination, provided it 
could be properly regulated." 

N. W. STORER, general engineer of railway department of 
Westinghouse Electric and Manufacturing Company, East 
Pittsburgh, Pa., gave this opinion: "If there were no fears on 
the part of power users that they were putting their business in 



ELECTRIFICATION DISCUSSED 315 

jeopardy by permitting all power to be concentrated by one 
company, there is not a particle of doubt in my mind that con- 
centration would be made in the near future. * * * The 
ideal system which Mr. Insull advocates can be put into effect 
only when the power companies are put under the control, and 
the prices are subject to the regulation, of an honest and efficient 
government." 

EDWARD N. LAKE, Stone & Webster Engineering Cor- 
poration, asserted that the Boston Elevated Railway Company 
had no reason to question its wisdom in building its own 
generating station, in view of the rate understood to have been 
offered by the Edison Company of Boston. 

MR. SPRAGUE, in closing the Boston discussion, reviewed 
briefly some of the engineering methods evolved in heavy elec- 
tric railroading. An effort should be made to get uniform 
reports from railroads which have been electrified. Electrical 
engineers should endeavor to get the facts, no matter what they 
are. As to the fundamental fact of the discussion, everybody is 
agreed that there should be consolidation of power houses 
sufficiently large and well equipped to insure reliability, safety 
and economy. 



A QUARTER-CENTURY CENTRAL-STATION 

ANNIVERSARY CELEBRATION IN 

CHICAGO 1887-1912 1 

CELEBRATING tonight, as we do, our twenty-fifth 
birthday, it affords me particular pleasure to speak to 
you. I remember well the early days of the Chicago 
Edison Company, when, instead of being its chief executive, 
I was its chief manufacturer. 2 Having established among the 
directors of the company some of the closest friends it has ever 
been my privilege to have, and partly on the suggestion I made 
myself to my friends, the late Edward L. Brewster and Mr. 
Byron L. Smith, 3 1 received an invitation in 1892 to become the 
president of the Chicago Edison Company. Thus I was 
afforded the best opportunity that I knew of in the United 
States to develop the business of the production and distribution 
of electrical energy. 

I have not prepared any set speech for this evening. I have 
asked my assistants to prepare for me a number of pictures and 

1. The twenty-fifth anniversary of the Chicago Edison Company and its 
successor, the Commonwealth Edison Company, was observed on April 29, 
1912. The meeting was held in Orchestra Hall, Chicago, and there was a 
large audience. It was given under the auspices of the Commonwealth Edison 
Company Section of the National Electric Light Association, and the chair- 
man of the section in that year, Mr. R. F. Schuchardt, turned the meeting over 
to Mr. L. A. Ferguson, then second vice-president of the Commonwealth Edison 
Company, who presided and introduced Mr. Insull. In doing so Mr. Ferguson 
remarked that in the twenty years of Mr. Insult's presidency the rating of the 
company's generating stations had increased from about 5,000 horsepower 
to about 400,000 horsepower. He also said that the companies of which Mr. 
Insull was the chief executive officer had a combined capital of $175,000,000. 
Mr. Insull's address on this occasion has been somewhat condensed from the 
original printing in The Edison Round Table. 

2. See note to chapter on "Problems of the Edison Central-Station Com- 
panies in 1897," page 1. 

3. Mr. Smith, long a director of the company and a member of the exec- 
utive committee, died in 1914. 

316 



ANNIVERSARY CELEBRATION 317 

diagrams that will enable me to trace the birth and the de- 
velopment of the industry from its early days in 1881 up to the 
time that the Chicago Edison Company was formed in 1887; 
and then its further development in this city, with some com- 
parisons with other cities during the last ten years. 

The gentleman whose picture I present to you [by lantern 
slide] needs no introduction. He has always taken a great 

THE WESTERN UNIOrt.TELEGRAPH COMPANY" 

26.000 OFFICES IN AMERICA. CABLE SERVICE TO ALL THE WORLD 



'TMCO, M. VAIL. PmIOtnT HVIOCBC BHOOK1 OHHL MOI 

RECEIVED AT Cor. Jackson Boulevard and la Salle St., Chicago &'? 

fp 26 ny qz 48 Rush 

Orange NJ Apr 26 1913 

SaMuel Insull 

130 Vest AASMB Ct Chicago 

On the twenty fifth anniversary of starting the old Chicago 
Edleon Co 1 greet the employees of Commonwealth Edison Co 
and "congratulate you all on the ebnoroally progressive spirit and 
work that haa lead to the wonderful degree of cucceac you have 
attained in quarter of a century. 

Thomas A Edison 

545pm. 

interest in the work that is going on in Chicago, and you will 
find a message from him suitable to this occasion. 1 

SOME LANDMARKS AND RELICS 

The view which is presented in Fig. 1 is one of the old 
laboratory buildings at Menlo Park. It is now 31 years and a 
little over to be strictly correct, 31 years and four weeks 
since it was my privilege to visit Menlo Park for the first time 
and to see in operation the first incandescent-lighting system 
established there experimentally. This proved the possibilities 
of a business that has grown from that small beginning in the 
course of three decades to a business that today employs up- 
wards of a billion and a half of capital. 

Shortly after the experimental station was started at Menlo 
Park, Mr. Edison moved into New York, and the offices of the 
Edison Electric Light Company were established at 65 Fifth 
Avenue. Fig. 2 shows the building, which was turned from a 

1. The portrait of Edison is given as the frontispiece of this volume. 



318 ADDRESSES OF SAMUEL INSULL 

mansion into an office. Fig. 3 is of much interest, as it shows 
the first direct-connected dynamo to be used commercially, so 
far as I am aware. The machine was built for us at the Twelfth 
Street station in New York. The particular view is that of the 
Edison central station in Milan, Italy, which had a rating of 
about 8,000 lamps, a similar one having been established in 
New York which had a rating of about 18,000 lamps. The 
New York station was started in September, 1882. 

In Fig. 4 is shown the old Edison Machine Works, the old 
Aetna Iron Works, in which John Roach, the great American 
shipbuilder, made his success as a manufacturer. About my 
first experience, when as a boy I came to this country in 1881, 
was on a March morning, when I went with Mr. Edison, with 
whom I was serving at that time, and listened to his negotia- 
tions with John Roach for the leasing of the building for the 
Edison Machine Works, which was afterward succeeded by the 
large establishment at Schenectady, now known as the Schen- 
ectady works of the General Electric Company. 

Some of the early specimens of Edison incandescent lamps 
are depicted in Fig. 5. They are lamps that were made about 
1881 and 1882. In looking over some of the old pamphlets 
descriptive of the apparatus of that period we find the system 
of incandescent electric lighting recommended for these reasons : 

"Because it is safest. 

"Because the lamp when burning can be broken into the 
finest shavings of any description without causing any fire. 

" It is the cheapest because there is no loss through imperfect 
combustion or defective burners, as in the case of gas. 

"And it is best because it is simple in its application, can 
be turned on and off at will, and does not require the use of 
matches." 

Fig. 6 represents one of the early electric-lighting fixtures. 

The old Edison dynamo, a type of machine that was made 
in the years 1881 and 1882, is shown in Fig. 7. It was thought 
to have enormous capacity. It was possible to get enough 
current out of a machine of that type to light, I think, sixty 
16-candlepower lamps! 




Fig. 5. Edison Incandes- 
cent Lamp of 1882 




Fig. 6. Early Type of 
Fixture 




Fig. 4. Edison Machine Works in New 
York in 1881 




Fig. 1. Edison Laboratory at Menlo 
Park in 1880 





Fig. 2. Edison Headquarters 
Fig. 3. Early Edison Central Sta- at 65 Fifth Avenue, New 

tion in Milan, Italy York, in 1881 





Fig. 7. Edison Dynamo of 1881 
and 1882 



Fig. 10. Edison Dynamo of 
about 1885 




Fig. 9. Interior of Pearl Street Station, New York, of 
1882, showing "Jumbo" Dynamos 





Fig. 8. Exterior and Interior Views of the Appleton (Wisconsin) Cen- 
tral Station of 1882, the First in the World 



ANNIVERSARY CELEBRATION 319 

The first Edison station, which was established in Appleton, 
Wisconsin, and originally had a rating of about 250 incandescent 
lamps, is illustrated in Fig. 8. This station was started April 
20, 1882. Usually the New York (Pearl Street) Edison station 
is given credit as the first central-station distribution system 
and plant started in this country, but as a matter of fact, while 
the New York Edison Company station was designed and the 
construction of it started at an earlier date than the Appleton 
station, the latter should be given the credit of being the first 
commercial central station established anywhere in the world 
for the generation and distribution of electrical energy on a 
multiple-arc system. I do not believe that it is still in opera- 
tion, it having been replaced by a more modern edifice and 
equipment. 

An interior view of the first station in New York, known as 
the Pearl Street station, is found in Fig. 9. This plant was 
built in what was known as "The Swamp " district of New York. 
The boilers were down below and the dynamos and engines 
were carried above, being shown in the picture. The station 
naturally went out of existence years ago; but from an en- 
gineering point of view it will interest many of the engineers 
here as showing Mr. Edison's conception that what was nec- 
essary for central-station work was dynamo-electric machines 
directly connected to the shaft of the engine. The two engines 
shown ran at a speed of about 350 revolutions a minute, I 
believe. 

Fig. 10 shows another type of bipolar Edison machine which 
was used in the early eighties. It represents the development 
of the small machine of Fig. 7 to a machine of a larger type. 
I believe that machine (Fig. 10) had the remarkable capacity 
of 250 16-candlepower lamps! 

We come now to 1887. Fig. 11 gives a front view of the 
old Edison building, known then as 139 Adams Street, the same 
site that we now occupy as our offices. 1 In Fig. 12 is shown the 

1. The building illustrated in Fig. 11 was remodeled about twenty years 
ago and is the present (1915) 120 West Adams Street. The "Edison Building" 
of today, one of the large office buildings of the city, is known as 72 West Adams 
Street. 



320 ADDRESSES OF SAMUEL INSULL 

engine room of the old Chicago Edison station. It was on the 
ground floor, or, rather, in a kind of half-basement. High- 
speed engines were belted to dynamos on the floor above. 
A view in the dynamo room is given in Fig. 13. 

It was on August 6, 1888, that the Adams Street station was 
first operated on the system, and it was shut down permanently 
on August 19, 1894. The original equipment consisted of four 
200-horsepower Armington & Sims engines, each driving two 
No. 32 Edison bipolar dynamos, with a rating of about 80 
kilowatts each, or say somewhere around 600 to 800 horse- 
power. Some detail of the Edison switchboard in the Adams 
Street station is given in Fig. 14. It should be interesting to 
anyone connected with our switchboard department today. 

Fig. 15 is that of the exterior of the Harrison Street station, 
Chicago. That station, in the early nineties, was probably one 
of the most celebrated stations for producing electrical energy 
in this country. The interior of the Harrison Street station 
is shown in Fig. 16. It is significant of the great growth of 
this industry that the entire rating of that station is less than 
the rating of one of the turbo-generator units that we order 
for our central stations in this present year. A view of our 
switchboard in the basement at Adams Street is given in 
Fig. 17. This switchboard is still in use. 

Fig. 18 is a view of our Twenty-seventh Street station. 
After the establishment of the Adams Street station and 
before my connection with the company a small district was 
started down on the South Side and the energy produced locally 
at No. 2700 Wabash Avenue. At the present time this old 
station is used as a substation. Soon after I took charge of 
the property we built a station on North Clark Street by the 
side of the Newberry Library building (Fig. 19). These small 
stations give you an idea of the small things that we were 
satisfied with twenty years ago. Fig. 20 is a view of the 
interior of the North Clark Street station which was the first 
station that we built having vertical engines with direct- 
connected generators. 

Particularly interesting is Fig. 21, which represents our 




Fig. 11. Original Edison Building, Adams Street, Chicago 




Fig. 14. Original Three-wire Switchboard in Adams Street Station, Chicago 







Fig. 13. Dynamo Room at Adams Street, Chicago, Station of 1888-1894 




Fig. 12. Engine Room of Adams Street, Chicago, Station of 1888-1894 




Fig. 15. Harrison Street Station, Chicago, Built in 1892 




Fig. 16. Interior of Harrison Street Station, Chicago 



ANNIVERSARY CELEBRATION 321 

first rotary converters. We put them into use at our Twenty- 
seventh Street station on October 15, 1897. These pieces of 
apparatus are of interest, not only to those connected with 
the Commonwealth Edison Company, but to the industry 
throughout this country and practically throughout the world, 
as I believe they represent one of the first attempts, if not the 
first, at massing the production of energy where it could be 
manufactured cheaply in large quantities, and its distribution 
made to distant points where the electricity could be converted 
to whatever pressure was necessary to enable it to be used in our 
service from house to house. 

A view of our first storage battery, started in May, 1898, is 
presented in Fig. 22 (facing page 331). 

Fig. 23 represents the growth of our business from 1888 to 
1900. Each one of those lines across the sheet represents a 
year. You will notice that our progress was quite steady from 
year to year. 

The original steam turbine and generator that we installed 
in the Fisk Street station is shown in Fig. 24. The Fisk Street 
station started operating on October 2, 1903. There are now 
ten turbines in Fisk Street station, each having a rating of 
12,000 kilowatts, or, say, 18,000 horse-power, a total of 180,000 
horse-power. 1 To give you an idea of the magnitude of power 
production in that station, I can tell you that four of those 
turbines would be about equal to the capacity of the steamships 
Lusitania or Mauretania. 

Our Quarry Street station, opposite Fisk Street, has a rating 
of 84,000 kilowatts, or perhaps 120,000 horse-power. 

An architect's drawing of our new Northwest Station (at 
North California Avenue and Roscoe Street) is reproduced 
in Fig. 25. When it was drawn it was assumed that we would 
have twin stations there. The plant we are building there now 
is at the left hand of the picture, and will have a rating of about 
120,000 kilowatts. If we ever build the second station, the 

1. Since the completion of the addition to Fisk Street station in 1914, 
the number of generating units in that station is twelve and the total rating 
in kilowatts is 165,000. 



322 



ADDRESSES OF SAMUEL INSULL 



combined rating there will be about 240,000 kilowatts or, say, 
about 360,000 horse-power. 

The diagrammatic drawing of Fig. 26 indicates the relative 
size of our generating units from the time of the starting of the 



LOAD FACTOR IN 

TERMS OF THE 

ABSOLUTE MAXIMUM 

12 MONTHS JULY-JUNE 
,HCU,V. .. 



ABSOLUTE MAXIMUM 
POINTS REACHED 

888 Z505 AMP 

889 4755 

890 -9855 
891 




9 10 11 12 



23. Growth of Central-Station Business in Chicago 
(Composite Ampere Curves) from 1888 to 1900 



Chicago Edison Company up to date. You see that the first 
one is about 160 kilowatts, the second one 3,500 kilowatts, and 
the third one 20,000 kilowatts. 1 The black columns indicate 
the relative rating of the units. 

The curves in Fig. 27 give the yearly maximum kilowatt 

1. Units of 25,000 and 30,000 kilowatts have been added to Fisk and 
Northwest stations since these words were spoken. 



ANNIVERSARY CELEBRATION 



323 




160 K.W. 
ADAMS ST. STATION- IE 



3,300 (C.W. 
HARRISON ST. STATION- 1 902 



2O.OOO K.W. 
NORTHWEST STATION-I9I2 



Fig. 26. Relative Size and Output of Generating Units in Chicago 



240,000 
220,000 



200,000 



180,000 



160,000 



140,000 



120,000 



100,000 



80,000 



60,000 



YEARLY 

MAXIMUM KILOWATTS 




260,000 

240.000 
220,000 
200,000 
180.000 
160.000 
140,000 
120,000 
100,000 
80.000 
60,000 
40,000 
20,000 



Fig. 27. Annual Maximum-Kilowatt Output in Chicago 
up to 1912 



324 ADDRESSES OF SAMUEL INSULL 

output of the company and show the growth over a period 
of years. 

STATISTICAL DATA 

Here are some decidedly technical curves the annual 
load factors of the Commonwealth Edison Company. 1 The 
line marked "total" is practically the index of our ability to 
earn a greater or smaller amount of money on each dollar 
invested in our business. You will see where it starts in 1902 
and goes gradually up until 1908, when it took a drop; but it is 
now higher than ever. Our load factor at the present time is 
between 40 and 50 per cent. In 1900 it was less than 30 per 
cent. That means that our investment is employed 50 per 
cent longer at the present time than it was employed in 1900. 
The result of that is that we can either earn more money on 
the dollar invested or else sell our product at a lower price to our 
customers. We take the middle course and try and earn a 
little more money on the dollar invested and sell our product 
at a much lower price to our customers. 

Fig. 28 shows the total output of the company from about 
the latest date of Fig. 23 up to 1911, showing the remarkable 
growth, year by year, governed somewhat by general business 
conditions. I draw your attention especially to the growth from 
1909 to 1910. General business began to drop off a little, so 
the growth between 1910 and 1911 has not been quite so great; 
still it has kept up at a pretty good rate. 

Conservation of fuel is important. As our output has gone 
up and as we have been able to buy apparatus of a more econom- 
ical character, our coal consumption has gone down. The 
saving in the consumption of coal per unit of output in the ten 
years from 1901 to 1911 is equivalent to a saving for the year 
1911 of 1,504,000 tons, or 37,500 carloads of coal a year, or 
three trainloads of 37 cars each every day. The importance of 
that side of our business and the possibilities of what can 

1. The reference here is to the diagram given as Fig. 9 of the chapter on 
"The Relation of Central-Station Generation to Railroad Electrification." 
See page 272. 



ANNIVERSARY CELEBRATION 



325 



probably be accomplished, as the use of electrical energy ex- 
tends and the uneconomical consumption of fuel ceases, has 



140,000 




Fig. 28. Total-Output Curves (in 
1898-1911 



3 4 56 7 89 10 11 12 

Kilowatts) for Chicago, 



been well shown in the addresses of Mr. de Ferranti, president 
of the (British) Institution of Electrical Engineers. 

Fig. 29 shows the lighting rates per kilowatt-hour for one, 
two, three and four hours' use per day; also kilowatts connected. 



326 



ADDRESSES OF SAMUEL INSULL 



In Fig. 30 is indicated the amount of light that one dollar will 
buy. 1 One dollar now buys almost nine times as much electric 
light as it did in 1886, and more than twice as much as it did in 
1907, only five years ago. The cost of electricity for two hours' 
use a day has decreased 69 per cent. Fig. 31 illustrates an 

















































PE 


LIGHT RA 
R KILO WAT 


r- E HO 


IR 




































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18 

r!6 

-3=-.4 

r 

z 

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PER 


our 




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vroprl 


T7H 




tL/ 














RESIDENCES 

FLATS, APARTMENT HALLS, H 
PRIVATE BARNS 

PUBLIC PLACES. OF 
AND WHOLESAL 

THEATERS, CHURCHES. PUBL 
OFFICE BU LDINGS, OFFICES 
AND REPAIR SHOP! 


OUSES AND 

FICES 

E 

C HALLS. 
FOUNDRIES 

DRUG 








1 


L 












1 




I 


1_ 


^ 


ro rir ( 








/^ 




L 


c. 


^J 


^PL.C 


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T,U 


/ 


I 





S HOP S 










STORES, ETC. 1 I X 

J^tP' 


^ v 
























-M-sPf 





















*90 '92 '94 '86 



1900 '02 '04 '06 '08 '10 '12 



Fig. 29. Lighting Rates for Various Hours of Use Daily 
(Chicago, 1912) 

electric-light bill in 1892 and one in 1912, a difference of twenty 
years. The 1892 bill was dated November 5, 1892, and amounts 
to $64.98 net, or an average of 19 cents per kilowatt-hour. The 
1912 bill is based on the same kilowatt-hours but figured at 
our present rates, and amounts to $19.95 net or 5,8 cents per 
kilowatt-hour. 

It is rather interesting to note the amount of money that 
we contribute for public purposes (Fig. 32). In 1889 we con- 
tributed $6,000; in 1899 we contributed $27,700, and in 1911 we 
contributed $1,057,500 to the city in the form of taxes and 
municipal compensation. This diagram (Fig. 33) gives the 
information with relation to fuel. In 1889 we spent $8,860 for 
fuel; in 1899 we spent $159,600, and in 1911 we spent $1,591,100. 

1. The idea illustrated by the chart of Fig. 30 is set forth in a different 
manner by Fig. 4 of the chapter on "Electrical Securities," page 431. 



ANNIVERSARY CELEBRATION 



327 



THE COST OF ET-ECTRICITY FOR TWO HOURS USE 

PER DAY HAS DECREASED OVER 69% 

THE EFFICIENCY OF THE 

INCANDESCENT LAMP 

HAS INCREASED 

OVER 26O%. 



TANTALUM 

RATES 

METALI7CO TANTALUM I2C AND 7C 
FILAMENT RATES 

RATES I4C AND 8C 

CARBON , 4C AND g c 
CARBON RATES 
RATES I6C ANO IOC 




1886 IN 1898 IN 1905 
IMS 2160 S480 



DRAWN WIRE TUNGSTEN). 
RATES IOC ANO OC 



ONE DOLLARONE DOLLAR ONE DOLLAR ONE DOLL 




ONE DOLLAR NOW BUYS ALMOST NINE TIMES AS MUCH 
ELECTRIC LIGHT AS IT DID IN 1886, TWICE AS MUCH AS IT DID IN 
J9O7. JUST FIVE YEARS AGO. 

Fig. 30. A Chart of 1912, Showing Relative Amount of Electric Light 
One Dollar Would Buy 



ELECTRIC CURRENT; 



TO The Chicago Edison Company, or. 





r tafc.y^-ITJL.-A.i. 

FRM Ufci O y V^ Ml. 

^^ ^V3. i 




72-o-v- xj"-/^>/a. 


^:;ri:z:;r.-i'::';z,,,,,,^. 


gr'fffiS 


<; . . > ZJJ7 
M ' .././ .?.J 


COMMONWEALTH EDISON COMPANY. 


__j 





*. Hurrimn A SKCcsRMAir, si 

62 5TATI ST.. 843. 
CHICAGO. HOV- 5 7*1912 


HnTTNlCR & SHUCEKMAW, 81 
2R8 STATK ST. 646 



Fig. 31. Bills of 1892 and 1912 for the Same Amount of Energy, 
Showing Decrease in Price 



328 ADDRESSES OF SAMUEL INSULL 




Fig. 32. Annual Payments for 
Taxes 



Fig. 33. Yearly Cost of Fuel 




Fig. 34. Total Amount 
Invested in Plants 





Fig. 30. Number of Customers 
Graphical Representation of Chicago Central-Station Growth 



Fig. 35. Income from Sales 
of Electricity 



ANNIVERSARY CELEBRATION 



329 




Fig. 34 shows the striking increase in our investment. In 1889 
we had $797,200 invested in plant. That means in generating 
stations and distribution system. 
In 1899 we had $17,461,000 in- 
vested, and in 1911 we had the 
imposing sum of $69,896,000 in- 
vested. 

In 1889 our income from 
sales of electricity was $105,700; 
in 1899 $1,792,700, and in 1911 
$13,902,300. (See Fig. 35.) In 
1893, as shown in Fig. 36, we 
had 4,100 customers; in 1899 we 
had 13,300, and in 1911 we had Fig 37 Distrib ^ ion O f Earnings 

157,115. of Commonwealth Edison Com- 

cv ow 4.1. j' * *u ** pany for Fifteen Months Ended 

Fig. 37 gives the distribution December 31, 1911 

of our earnings for the fifteen 

months ended December 31, 1910. Our payroll amounted to 
$3,651,100, or a little over 19 per cent of our receipts. Other 
operating expenses are as shown, including fuel amounting to 
$1,996,600, or a little over 10 per cent of our receipts. Our 
taxes and municipal compensation amounted to $1,316,700, 
which is about 7 per cent of our receipts. Our insurance 
amounted to $259,000, about 1.5 per cent of our receipts. 

Our depreciation and surplus are 
shown in the diagram, while 
our dividends and bond interest 
amounted to $4,632,000, or about 
24 per cent of our receipts. 

As shown by Fig. 38 the 
gross income of all the public- 
service companies in Chicago 
amounts to $82,273,600, of which 
the Commonwealth Edison Com- 
pany represents $15,331,200; 

Fig. 38. Grossn of Chicago alm St aS much aS the ^ COm - 

Public-Service Companies in 1911 pany, a little more than the 




330 ADDRESSES OF SAMUEL INSULL 

telephone company, and not quite half as much as the sur- 
face and the elevated roads put together. 

Of the total amount of electric-service business now possible 
in this community, we are at present supplying only about one- 
third, or a little more than one-third, possibly 35 per cent. It 
takes in round numbers about $75,000,000 to operate our 
business at the present time. If we were to get all of the busi- 
ness possible to be obtained that is, if everybody had the 
same ideas as we have as to the economy of producing and 
distributing energy electrically it would in my judgment 
take nearer $250,000,000 to operate the business of manu- 
facturing and distributing energy within the city of Chicago. 

Fig. 39 is a reproduction of a photograph 1 of an old relic 
that is really very close to my heart. It is the second Edison 
electric locomotive ever built. It was built and operated 
successfully in 1882 at Menlo Park, New Jersey, over a track 
not unlike the ordinary railroad track that you see anywhere 
in this part of the country, except that the ties were a little 
higher above the ground than is usual in railroad construction. 
The system of operating it is about the same as that em- 
ployed today on the New York Central and Pennsylvania roads, 
except that instead of having a third rail the two rails operated 
as the two conductors of the circuit. The road was about two 
miles long and was operated experimentally during the whole of 
one year. It was built purely as an experiment, and I think 
was possibly the first experimental electric railway of any 
length built in this country and probably the second or third 
built anywhere in the world. A modern electric locomotive 
one of our own is shown in Fig. 40. 

This chart 2 is a comparison of Chicago and New York 
central-station load diagrams for the maximum day of the 
year. I think I may say that this diagram represents the 

1. The man standing on the front platform of the car attached to the 
locomotive is Samuel Insull, then twenty-two years old. This is one of the 
few photographs of the author of these addresses of which publication has been 
authorized. 

2. See Fig. 14 of chapter on "The Relation of Central-Station Generation 
to Railroad Electrification," page 280. 




Fig. 39. Edison Electric Railway, Menlo Park, 1882 




Fig. 40. Electric Locomotive of 1912 at Northwest Station, Chicago 



ANNIVERSARY CELEBRATION 331 

difference in the policy of the New York companies as compared 
with the Chicago companies during the last ten years. The 
Commonwealth Edison Company's load factor represents 
exactly our earning capacity on our investment. Our load 
factor in 1902 (maximum day) was 42.3 per cent; in 1912 the 
corresponding figure was 55.7 per cent. That means that in 
1912 we used our investment about 13 per cent longer. And 
yet the New York Edison Company was only able to employ 
its investment about 5 per cent more in 1911 than we did in 
1902. I do not know of anything that shows more clearly the 
difference in the character of the business done by the two con- 
cerns than that particular curve. 

WHAT THE SERVICE MEANS 

Some of the financial figures of our business are remarkable. 
Take those figures that I showed you in Fig. 33. They in- 
dicate that the quantity of coal consumed per year is upwards of 
one million tons; per day upwards of 2,800 tons; and upwards 
of 120 tons of coal an hour. There were some hours during the 
winter when probably 250 tons of coal had to be passed over our 
grate bars. At a time of threatened strike in coal-mining 
regions not when the strike is actually taking place, but 
months before this company in order to protect the interests 
of its customers has to accumulate large reserves of coal, 
300,000 or 400,000 tons. The incurring of such expense makes 
the apprehension about as serious as the strike itself would be. 
I presume that in the last few months, prior to April 1, the 
storage of coal above the ordinary outlay for fuel will have 
amounted to upwards of $300,000. Now, we have to do a 
thing like that from two points of view our duty to our 
customers and our duty to ourselves. The steam-railroad 
trains can stop and stay at one point all winter, if necessary, 
due to accumulations of snow, a strike of their employees, or 
whatever unfavorable conditions Providence or man may bring 
about, and it is forgotten in a day. But just imagine what 
would happen to a community like Chicago if our service 



332 ADDRESSES OF SAMUEL INSULL 

stopped! The wheels of industry would cease. The majority 
of the newspapers would cease to be printed. The Postoffice 
and the Federal courts would have to shut down. In fact, 
most of those things which contribute to the comfort of mod- 
ern civilization would have to come to a standstill. 

We pay the city of Chicago, as I have stated, $1,058,000 
annually for taxes and municipal compensation. That amounts 
to $2,800 a day, $120 an hour, just about $2 a minute. And 
yet we are not good citizens! 

The $75,000,000 necessary to handle a business such as 
ours and I might say in passing that I do not know any- 
where in the world where it would be possible to duplicate the 
business we have and the plants we have for $75,000,000 
costs $4,500,000 a year for interest at 6 per cent. It costs 
$12,300 per day, or $510 an hour, or not very far from $10 a 
minute. To you young men who have not been dealing with 
the problem of how to overcome interest quite as many years 
as I have, I will say that during all the time you waste in the 
service, when you ought to be at work, you are wasting a very 
considerable portion of the interest on the amount of money 
necessary to run this business. That waste, I may say also in 
passing, is of far more serious consequence to you than it is to 
us, because you can get far more benefit out of close attention 
to your business than we can get out of you if you do pay close 
attention to your business. 

The Commonwealth Edison Company consumes at the 
present time 10 per cent of the soft coal consumed in the city 
of Chicago. I mention that to show you what the possibilities 
of the future are, if the day should ever come when electrical 
energy can be produced so cheaply, and when the means of con- 
version into heat become so cheap, that we can use electricity 
for heating purposes. The possibilities before us are some- 
thing enormous, so far as the future of the business is concerned. 

Here is a rather interesting point. The amount of energy 
produced by us in 1911 was greater than the entire amount 
produced by the public energy-producing companies of New 
York, Brooklyn and Boston, which produce energy for sale; 



ANNIVERSARY CELEBRATION 333 

that is, greater than the entire amount produced by the New 
York Edison Company, the Brooklyn Edison Company and 
the Edison Electric Illuminating Company of Boston put 
together. We produced 716,000,000 units (kilowatt-hours) 
and they produced, among them, 692,000,000 units. 

LESSONS FROM THE CAREER OF EDISON 

I would a great deal rather, on an occasion of this kind, 
talk to my own people about things that are probably of closer 
personal interest to them, and which give me a far greater 
pleasure to talk to them about, than deal with the historical 
part of our business, as I have felt it necessary to do here to- 
night. Before I sit down I want to talk to the Commonwealth 
Edison fellows here. I want to talk to you as I try to talk to 
you whenever it is my privilege to come before you. 

Take the picture that I started with here this evening, the 
picture of my old chief, Mr. Thomas A. Edison, one of the 
greatest minds of our age. The only advantage that he had 
when he started life was the fact that he came from fine old 
Scotch-Holland stock and came from that "Western Reserve" 
which has produced so many great men in this country. 1 
Probably the greatest advantage he had, above even the 
marvelous intellect that God endowed him with, was the fact 
that he had a mother who gave him courage to overcome the 
obstacles that he must meet. Just consider what that man has 
accomplished. He is the inventor of our industry. You can- 
not install a system, whether it is as small as the little system 
that was started in 1882 at Appleton, Wisconsin, or as great 
as the great system that we are operating here in and around 
Chicago today you cannot in fact install any system for the 
distribution of electrical energy without using the inventions 
of Thomas A. Edison. His patents may have expired; but 
still to this day you have got to use the same engineering meth- 
ods that he devised and that he described in his early distri- 
bution patents. 

1. Edison was born in Milan, Ohio, in 1847. 



334 ADDRESSES OF SAMUEL INSULL 

Now, he had far less opportunity than the average young 
man who enters our service. I am not talking now about his 
brains or his capacity for inventive work, but I am talking sim- 
ply about his opportunities. I remember traveling with him 
from Detroit to Port Huron, Michigan, some thirty years ago, 
and hearing him tell the story of the days when he was the 
"peanut boy" on the very train that we were traveling on, and 
of what he went through to learn, step by step, the things that 
enabled him to take advantage of the marvelous intellect that 
he had been endowed with. 

Never do I think of the work Edison has accomplished with- 
out trying to recall to my mind the possibilities and the ad- 
vantages that the men of today have as compared with his 
situation as a boy of from twelve to fifteen, without education, 
sitting up nights in a little wayside station, learning to tele- 
graph. Later, landing in Boston in the dead of winter, having 
so little financial resources that, according to the story I have 
heard told frequently, he walked into the telegraph office in 
zero weather with a linen duster on; having so little idea as to 
the methods to be adopted in educating himself that he went 
into the Boston Public Library and started on a row of books 
intending to read the whole library so he should be dead sure to 
get everything there was there. 

When I remember what he went through in his early days 
and how he kept at work, when I remember his " sticktoitive- 
ness," his desire to "get there," I wonder at the men around 
me that they do not take more into their hearts the example of 
that man who stands at the head of our industry and try to 
emulate some of his efforts. I do not mean to say that you 
can all be Edisons; I do not mean to say that you can all startle 
the world with some great discovery in mechanics or electricity; 
but you can all do the work that is before you and do it to the 
best of your ability. 

DEVELOPING THE ORGANIZATION BY ITS OWN BRAINS 

Bear this in mind, that the man who only does what he is 
paid for never gets paid very much beyond just what he is 



ANNIVERSARY CELEBRATION 335 

entitled to, his daily wage. We are engaged in a business that 
has been operating now something like three decades I 
mean from the time of the birth of the incandescent lighting 
business operating in this city something like a quarter of a 
century. The developments of the last few years demonstrate 
that the economical way of doing this business is to mass the 
production of electrical energy and distribute it over wide areas. 
This means the employment in great organizations of an 
enormous amount of capital, and capital is ever ready to pay 
for brains. I say again, therefore, that great opportunities 
are before you in the business in which we are engaged. It 
rests with you whether you will take advantage of them. 

You may think that I am preaching the same story that I 
preach every time I have a chance to talk to you. Perhaps 
that is so. I think the chances are that I shall continue to 
preach just the same story year after year. There is nothing 
that I like to see so much as the progress of my own people; 
it does not matter whether it is in my own personal office or 
whether it is in the organization. There is one thing in my 
twenty years of managing this business that I am more proud of 
than of anything else, and that is that I have been able to de- 
velop it with the assistance of the brains within the business. 
I do not know of any case where a man of considerable position 
has come into our office from the outside. You have simply to 
go over the list of our officers, of our engineers, and take the 
people who may be considered as on my own personal staff. 
Take Mr. Ferguson, who used to be at the head of the testing 
gang on the street, testing tubes; take Mr. Gilchrist, who, 
according to my impression, was Mr. Church's office boy; take 
Mr. Fox, who used to be my stenographer; take Mr. Gulick, 
who was the bookkeeper in one of the small companies we took 
in from the South Side; take Mr. Sargent, who was the first 
engineer of the Chicago Edison Company and who today is the 
most distinguished designer of central stations in the world. 
Take all of them; take myself; we have all started the same way. 
I am a little older than some of you, and yet it is not so many 
years ago that I used to lick stamps in an office in London. 



336 ADDRESSES OF SAMUEL INSULL 

Just bear in mind what the men who work have been able to 
do, and remember that you have those same opportunities. 
Sometimes you may think that there are two or three big 
fellows ahead of you and that they have got their jobs by 
favoritism and that you have been put in the background. 
You may be right; there is one chance in a hundred that you 
are right on that proposition; but there are ninety-nine chances 
that the reason you stand still and do not go ahead is because 
there is something lacking inside of you. 

WHO WILL BE THE CHIEF TWENTY-FIVE YEARS HENCE? 

I make this confidential and very personal talk to you be- 
cause I have no greater pleasure than to see those around us 
prosper. We have all of us started the same way. There are 
very few men in Chicago who have been born with silver spoons 
in their mouths. Take the great merchant princes in this 
city; take so distinguished a man as Mr. Marshall Field, who 
so recently departed from among us. Take men like Mr. 
George M. Pullman; take the great captains of industry 
throughout this country today and they all started from little 
things. 

We are on the threshold of an era when the consolidation of 
capital for all classes and purposes is going to be something 
enormous. The price that will be paid for brains will be greater 
than ever. You are in a business that must be run in large 
units. It does not matter whether the demagogue or the 
politician with some axe to grind (usually at the expense of the 
public) or the rabid reformer, misinformed on the true eco- 
nomics of business it does not matter if those people say, 
" We will have no monopoly !" They must have it and we must 
have it. The only way our product can be sold cheaply in any 
community is by the establishment of enormous organizations 
with enormous aggregations of capital producing energy at the 
lowest possible cost and distributing it in the most economical 
way. To direct these great enterprises men are wanted. 
There isn't any reason why this Mississippi Valley, the richest 



ANNIVERSARY CELEBRATION 337 

part of the United States in productive ability, should not ob- 
tain the greater part of its men, for the management of the 
great energy-producing companies that must be established 
throughout the Valley in the next fifty years, from the boys who 
are now entering the service of the Commonwealth Edison 
Company. If we are as reasonably successful as an organiza- 
tion in the next twenty years as we have been in the last twenty 
years, we will establish such a reputation that the mere fact 
that a man has worked for us for any length of time will con- 
stitute a diploma that will gain him respect and opportunity 
anywhere in this western country. 

All I ask you men to do is to take advantage of these op- 
portunities. The company does everything it can for you. It 
does it because it thinks it is good business policy to do so. 
That is the basis on which it is done. It supports this institu- 
tion 1 because it thinks that if it can raise the average intelligence 
of its employees their productive ability will be greater. Now, if 
the productive ability of its employees is of some advantage to the 
company, how much greater advantage must it be to the men 
themselves ! The company does everything it can in the way of 
helping you to save your money, putting you in the way of 
making money, and in return all we ask you to do is to do all you 
can for yourselves. Incidentally, you will help us. 

Probably, after this business has been running another 
twenty-five years, I will not be standing here, or on a plat- 
form corresponding to this, celebrating the half-century birth- 
day; but if the organization fulfills its true traditions the man 
who then occupies my present position will be someone who at 
the present time is just on the threshold of entering our service. 

1. Referring to the Commonwealth Edison Company Section of the 
National Electric Light Association. 



SUPPLYING THE ENERGY REQUIREMENTS 
OF THE COMMUNITY 1 

PROBABLY the most important thing in connection with 
the development of the supply of energy in the com- 
munity is the impressive change that has taken place 
within a relatively few years as to the size of the units used in 
the generation of electricity. In this development rests to a 
very large extent the solution of the economic production and 
distribution of energy in a community like Chicago and the 
industrial area surrounding it. If we still had the small units 
used twenty or even ten years ago, the cost of production would 
be such as to make impossible the present low cost of energy; 
and, after all, whether you need the energy for transportation, 
for light or for industrial purposes, the first essential is to get 
it at the lowest possible cost. 

It is not a well-founded idea, if the production of energy 
is centralized under one organization, that the electrification 
of steam railroads means the use of a very large amount of 
energy. 

Owing partly to differences in method of operating and 
partly to the difference resulting from conditions here in Chi- 
cago, we [the Commonwealth Edison Company] are able to 
get almost a third more use out of our investment than they 
are able to in most of the other large cities. By combining 
various forms of business we are able to use the dollar invested 
in our business about a third longer time, on an average, than 
the other large producers of energy in the other great centers 

1. On May 23, 1912, Mr. Insull gave a brief address before the City Club 
of Chicago. It was the first of a series of addresses planned by the club and 
relating to "Chicago's Transportation Problem." Only a part of the speech 
is reproduced here, as much of the information given, as well as the charts which 
were used, had been presented in previous addresses. 

338 



COMMUNITY REQUIREMENTS 339 

of population of this country. That point has an important 
bearing on cheap transportation. If the transportation com- 
panies produced their own energy, the cost of operating, the 
depreciation and the interest would be greatly increased. It 
is the combination of all the various utilities using energy 
that enables us to sell it to the small consumer on an average 
cheaper than the price at which it is sold in any of the large 
centers of population on either side of the Atlantic. 

TAXPAYERS' MONEY SHOULD NOT BE USED TO FURTHER 
ECONOMIC WASTE 

The best evidence that cheap power enters into almost 
every man's thoughts is the way the politicians play upon 
the proposition. Glowing pictures are drawn of the amount 
of power than can be produced from waterways within this 
state, and because water runs down hill it is asserted that the 
power can all be sold for nothing or at a very low price. Of 
course, that is simply a dream. I mention the subject because 
it is very much in the public mind. There are some of us en- 
gaged in the energy-producing and kindred businesses who are 
trying to give this community the cheapest possible transpor- 
tation, the longest possible ride for a nickel, the greatest possi- 
ble amount of travel from one part of the city to the other, 
with the least possible expenditure. I know of no one element, 
outside of interest and depreciation, that has so important a 
bearing on that subject, as the question of the cheap produc- 
tion and distribution of energy. 

The only way that you can get cheap production and dis- 
tribution of energy is by concentration, by monopoly. I care 
not whether I run the monopoly or whether somebody else 
runs it, whether the capital employed is raised by my friends 
or by somebody else's friends; but whatever may be the source 
of the money used, the only economical way to manufacture and 
distribute energy, to get all there is in it for all the people, is 
by concentration, by monopoly. 

We have in use at this time nearly 400,000 horse-power 



340 ADDRESSES OF SAMUEL INSULL 

produced in the central stations in and around Chicago. Eighty 
or eighty-five per cent of that energy is produced by one institu- 
tion employing private capital. Fifteen to twenty per cent 
is produced by another institution, the Sanitary District of 
Chicago, employing the capital of the taxpayers. I know of 
no greater waste of money going on in this community in a 
public way at this time than in connection with that second 
operation. It is economically wrong. There should be but one 
producing system, but one distribution system. I do not care 
whether the railroads buy from me or whether the city buys 
from the Sanitary District it should all be one. You can 
get more money out of the dollar invested if there is only one 
system. 

While I myself am a great believer in the regulation of 
all public utilities, I would like to remind you of the results 
that are being obtained for the customer and the stockholder 
out of the production and distribution of energy by a company 
whose rates have never been regulated, 1 whose reductions have 
always been made of its own free will. The only occasion on 
which an attempt was made at regulation was during the Dunne 
administration. Mayor Dunne vetoed the ordinance, and the 
company put the reduced rates in operation the next day. So 
we have never been regulated, notwithstanding that we are 
practically a monopoly and that we are living in a period when 
monopolies are supposed to be very bad that is, in their 
business principles. 

You have here in this city a monopoly that sells you energy 
at a lower price than you can buy it in any city of similar 
size in the world and can still make such substantial returns 
to its stockholders that its securities are in good demand. 

I think that you gentlemen who take a great interest in 
the civic welfare of the community in which you live can not 
do a better work than to do all that you possibly can to insure 

1. It was in 1913, after the date of this address, that the five-year read- 
justment of electric service rates, as provided in the contract ordinance between 
the City of Chicago and the Commonwealth Edison Company, was effected. 
The State Public Utilities Commission of Illinois came into existence on Jan- 
uary 1, 1914. 



COMMUNITY REQUIREMENTS 341 

the very lowest cost of energy to the producer and the very 
lowest cost to the user; and the way to do that is to have 
absolute concentration of production and distribution, whoever 
that work may be done by. 



STEPPING STONES OF CENTRAL-STATION 

DEVELOPMENT THROUGH THREE 

DECADES 1 

IT AFFORDS me very great pleasure to have this opportu- 
nity to meet so many of the employees of the company 
over which my friend Mr. Freeman so ably presides. The 
early part of the Victorian Era gave us steam railroads, gave 
us gas as an illuminant, and later on gave us the electric tele- 
graph. The decade in which our business first started, namely, 
in the seventies that is, the experimental portion of our 
business gave birth also to another wonderful development, 
the telephone. In this country at that time nothing was 
known of the electric light, except through the work of Brush, 
Thomson and Houston on series arc lighting, although as 
early as the winter of 1878 Mr. Edison made his first announce- 
ment with reference to his experiments on incandescent lamps. 
This announcement resulted in a serious fall in the price of 
gas shares all over the world, owing to the fact that the investors 
thought that the day of gas illumination had about ended, 
whereas, as a matter of fact, it had only just about begun. 

In the winter of 1880 the first experimental central station 
was installed at Menlo Park, New Jersey, which at that time 
was Mr. Edison's home. Fundamentally what he had there is 
practically what you have today in Brooklyn, if you will 
cut out your alternating-current transmission lines, and your 

1. This instructive and entertaining lecture was delivered before the 
Brooklyn Edison Company Section of the National Electric Light Association 
on June 26, 1912. It has been slightly condensed to avoid repetition. How- 
ever, Mr. Insull drew on the rich fund of his experience for much fresh material 
and several newly related anecdotes, and care has been taken to preserve these 
contributions to the history of the art, even though, in doing so, it is necessary 
to restate basic facts about which the incidents are clustered. 



A STORY OF THREE DECADES 343 

substations, with the exception that the system at Menlo Park 
was operated on the two-wire system, as at that time the three- 
wire system had not been invented. He had motors operat- 
ing his work-shops and he had incandescent lamps lighting the 
houses. These lamps, it is true, were not of an efficiency of 
1.25 watts per candle, as you have today, with 1000 or 1500 
hours' life; they took about seven watts per candle, and would 
burn about long enough to last while you were screwing a lamp 
in the next socket. 

SEVEN- WATT LAMPS THEN, BUT FUNDAMENTALS HAVE NOT 

CHANGED 

But still he had there all the fundamentals of a central- 
station system. The conductors were underground a thing 
that at that time, and to my knowledge for two or three years 
later, was considered absolutely impossible by almost everyone. 
That is, I do not think there was an electrical man on either 
side of the Atlantic, except Edison, who thought it possible 
to insulate copper so as to make it possible to carry sufficient 
energy underground without extreme leakage. 

It was 1881 that the commercial development of the Edison 
incandescent lighting system started. I suppose I need not 
apologize in a meeting of Edison men, in talking of three dec- 
ades of central-station development, if I speak all the way 
through of that development as an Edison development. You 
all know just as well as I do that whatever details may have 
been contributed by others, the fundamental parts of our sys- 
tem, from the generator to the lamp, whether it be the article 
itself, or whether it be the conception of the great engineering 
principles that have made our business possible, can all be 
traced to the marvelous genius of the man whose name we all 
work under. 

As I came down Fifth Avenue, New York, this morning, 
my eyes turned, as they always turn whenever I come down 
Fifth Avenue, to 65 Fifth Avenue. It is a brownstone build- 
ing, a little south of Fourteenth Street. In appearance the 



344 ADDRESSES OF SAMUEL INSULL 

building has changed somewhat in 31 years, but to me it is 
the commercial birthplace of this great industry. Between the 
time that it was my privilege to receive the offer from Mr. 
Edison to come to this country to work for him, and the time 
of my arrival, he moved his operations from his laboratory 
at Menlo Park to 65 Fifth Avenue. His reason for doing this 
was that the work, so far as its purely laboratory experimental 
stages were concerned, was relatively through. The work 
that was ahead of him at that time was the commercial de- 
velopment and what you might call the commercial experiment- 
ing in connection with the starting of the business. The 
Edison Electric Light Company that financed Mr. Edison's 
experiments took the building at 65 Fifth Avenue, and Mr. 
Edison established his offices there. 

COMMERCIAL DEVELOPMENT OF ELECTRIC LIGHTING 
IN THE EIGHTIES 

At that time (I am speaking of the early days of March, 
1881, just after the Edison Electric Light Company's office was 
opened at 65 Fifth Avenue, New York) there was not a single 
factory in this country or in Europe where you could obtain 
generators suitable for the work. There was not a factory 
on either side of the Atlantic where you could obtain the con- 
ductors necessary to convey energy, and there was not a lamp 
factory in existence where you could get lamps manufactured. 
There was a small experimental lamp factory at Menlo Park, 
which has since disappeared. My old friend, Mr. John Kruesi, 
had just taken a shop at 65 Washington Street, New York, for 
the manufacture of Edison tubes; and a few days after my 
arrival here, Mr. Edison leased from Mr. John Roach, the 
ship-builder, his old Aetna Iron Works on Goerck Street, between 
Grand and Houston streets, over on the East Side of New 
York. But it was well into the summer of 1881 before it was 
possible to turn out dynamos, to turn out conductors, to turn 
out lamps, for use on the first central-station system. 

Just imagine, if you can, that by the wave of your hand you 



A STORY OF THREE DECADES 345 

could bring about such a condition of things that all the thou- 
sand and one articles used between the generator and the lamp 
were to disappear, and you had to start over again to create 
them. Now that was the situation existing in the spring of 
1881. We had a few clumsy wooden sockets and some enor- 
mous contrivances that went under the name of switches. We 
had not even any insulated wire. We used in the first year of 
the business a wire which I think was erroneously named 
"underwriters' wire." It had about the same insulation as 
weatherproof wire has today; only the compound used was 
paint and was not nearly as good as the compound you now 
use on weatherproof wire. We had a few wooden cleats. I 
do not think in the early days we had got as far as to use mold- 
ing. Yet notwithstanding the fact that everything had to be 
created that all that had been demonstrated in the experi- 
mental plant at Menlo Park was the feasibility of the scheme 
from an electrical point of view the first central-station in 
New York, which I think was at 255-257 Pearl Street, just 
south of Fulton Street, was built and put in operation some 
time in September, 1882. 

A SLEEPY PRIVATE SECRETARY AND A FRIENDLY POLICEMAN 

Let me relate a personal incident in connection with the 
building of the first system in New York. I remember that 
during the summers of 1881 and 1882 the weather was some- 
what warmer than it has been in New York and Brooklyn 
today. My friend Mr. Kruesi used to superintend the manu- 
facture of the two-conductor Edison tubes by day, and Mr. 
Edison and Mr. Kruesi (who were the only two men who knew 
anything about it) used to spend their nights laying the tubes 
in the streets and testing the conductors for insulation. I used 
to have to work all day myself on the business end of affairs; 
but I was anxious to get some technical knowledge of the sub- 
ject that was being dealt with. I do not know whether it was 
curiosity, ambition, or what it was, but I wanted to know what 
was going on; and I used to go downtown toward evening, about 



346 ADDRESSES OF SAMUEL INSULL 

four nights out of seven, with Mr. Edison the other three 
we had to sleep and my job was to watch a galvanometer. 
I got a closer acquaintance with the police then than it 
has been my good fortune to get since. During the weary 
hours when I was watching the pointer of the galvanometer, 
and wondering what I was doing it for, and wondering what 
they were finding out about it, I would doze off to sleep; and 
when the figure of Mr. Edison or Mr. Kruesi happened to come 
around the corner, my friend the policeman would give me a 
poke with his night-stick, and by the time the one gentleman 
or the other got to the corner of Ann and William streets, or 
Nassau and Fulton streets, I would have my story about 
correct as to what had taken place. Of course it was only a 
question of a very few nights before they found out, and got 
some fellow who could keep awake. 

EDISON RISKED His PRIVATE FORTUNE 

While the first central-station system installed ultimately 
proved a financial success, in the early days of its operation 
its customers were relatively few, although its service was 
extremely good. I think it ran for about 14 months without a 
breakdown, which was a remarkable record for a primary com- 
mercial experiment. The capitalists who had supplied the 
first million dollars necessary to build this first system lost 
heart, and I think it redounds very greatly to the credit of 
Mr. Edison that, besides risking what personal fortune he had 
at that time in the development of manufacturing establish- 
ments to produce the apparatus necessary for use in connec- 
tion with his system, the financing of the operating system itself 
was done by Mr. Edison to the extent of several hundred 
thousand dollars until the operation of the Pearl Street plant 
had arrived at a point where the capitalists regained confidence 
enough to supply more money. I don't know whether even 
Mr. Edison would remember today that such was the case. 
Probably I am the only man living who had to do with the 
details of the venture who knows that the facts are as I have 



A STORY OF THREE DECADES 347 

stated. I made up my mind that I would make this statement 
here tonight as a matter of record to show how far Mr. Edison's 
unbounded belief in his own invention went. 

I can well remember, as recently as 1884, that everything 
that Mr. Edison had and he had started as most of us 
started: whatever he got was from the work of his marvelous 
intellect I say I can well remember that as late as 1884, 
with every dollar he had risked in this business, he asked me 
one day whether I thought he could clean up and be out of debt, 
and that if he went back to telegraph operating, whether I 
thought I could make a living by going back to shorthand 
writing. 

How THE THREE-WIRE SYSTEM CAME INTO BEING 

If my recollection is correct, it was in the winter of 1882 
that Mr. Edison came to the conclusion that in order to get a 
great commercial development it was necessary to provide a 
system of distribution requiring less copper than the two-wire 
system. At that time he had transferred his experimental 
laboratory, much to the regret of the men who were responsible 
for the financing of the establishment, to the shops of the Edison 
Machine Works on Goerck Street, the predecessor of the present 
Schenectady works of the General Electric Company. I 
remember going down there one winter night in 1882, just 
by accident, and seeing Edison's first experiment on the three- 
wire system. He hadn't set the mathematicians at work at 
that time to see how much copper could be saved. He was 
simply taking a short cut, and seeing whether it was possible 
to operate a three-wire system. He had the two brushes on the 
dynamo in their regular position and a third brush on the neu- 
tral point. A neutral wire was stretched across the room with 
the other two wires. Lamps were connected on each side. As 
the machine was only about a 100- volt machine, he had 50- 
watt lamps burning on each side of the three-wire circuit. And 
that was all the experimenting there was to the three-wire 
system! 

There was a lot of theorizing as to what the saving was. 



348 ADDRESSES OF SAMUEL INSULL 

The inventor was pretty deaf even at that time. I shouted to 
him, and said: "Mr. Edison, how much copper do you think 
that will save?" "Oh," he answered, "you are alway looking 
at it from the dollar point of view!" He added: "I think it 
will save about two-thirds." And I think two-thirds was 
about what it did save. At the same time Professor Hopkin- 
son in England and Werner von Siemens in Germany were 
working on the same idea. I am under the impression, although 
it is many years since I read the record, that Professor Hop- 
kinson thought it possible that 25 per cent of copper could 
be saved. I don't know the percentage which von Siemens 
thought could be saved. 

But that little experiment in the workshop on Goerck 
Street was the thing that gave impetus to the central-station 
business. At that time we were looking for something to en- 
able us to start central-station systems in small towns. The 
capitalists in the larger cities were not prepared to go ahead. 
After the start of the station in New York and the one in Apple- 
ton, Wis., in 1882, a small station in Dijon, France, was put 
into service on June 8, 1883. During the same year there 
were relatively small stations started in Santiago, Chile; Milan, 
Italy; Manchester, England, under the supervision of Professor 
Hopkinson (who, as I have just stated, also worked on the 
three- wire system), and at Holborn Viaduct in London. The 
great uncertainty of the investment, the great risk that the 
capitalists thought there was in putting money into the busi- 
ness, led us, as I have said, to endeavor to cheapen the system 
and apply it to small towns. 

EDISON AS AN ELECTRICAL ENGINEER 

Our electrical engineering was always good. There were 
not quite as many electrical engineers with parchments at 
that time; but we had one man who was very careful to see 
that the electrical engineering was good, and that was Edison. 
But the steam engineering was wretched. We tried to make 
it as cheap as we possibly could. We went through the small 
towns in Massachusetts and in Pennsylvania and Ohio, and 



A STORY OF THREE DECADES 349 

endeavored to start small plants. I had the honor to run the 
department that installed the plants. It was called the Thomas 
A. Edison Construction Department, and some fellow who was 
a little quicker at repartee than he was at accepting responsi- 
bility called it the "Destruction Department," because of the 
numerous troubles we had in starting stations and operating 
them. While we got a few million dollars invested in the busi- 
ness, it is probable that by 1885 there was not much more 
than $5,000,000 invested in the central-station business. Of 
course when I speak of the central-station business, I speak of a 
multiple-arc system from which energy can be taken for all 
kinds of work. I do not consider the series arc-lighting plants, 
which were general throughout the country at that time, as 
serious attempts at central-station service. 

In 1885 the records show that there were about 400 lighting 
companies, but most of those were series arc-lighting companies, 
and the probability is that at that time there were less than 50 
or 60 companies, and all of them small, giving electrical service; 
that is, distributing electrical energy 24 hours a day and 365 
days in the year. 

In 1885 my friend Mr. Edward H. Johnson made an effort 
to raise the capital to start a central-station system in another 
large city, and he picked out Boston for the purpose. So far as 
my recollection serves me, if it had not been for the money put 
into the enterprise by the Edison Electric Light Company 
(that is, the patent-owning company), some assistance rendered 
by the manufacturing companies, and the personal subscription 
of Mr. J. Pierpont Morgan, who always was a warm friend of 
the Edison central-station business if it hadn't been for 
those three elements, it would have been impossible to provide 
the capital to build a station in Boston. 

THE INDUSTRY ESTABLISHED IN ONE DECADE 

The station was started, I think in February, 1886, and 
the distribution system was by overhead wires. I believe it 
was not until two or three years later that the first ten miles 
of underground conductors was installed. It is interesting to 



350 ADDRESSES OF SAMUEL INSULL 

note that the first alternating-current system, which has done 
so much for the industry in its larger development, was started 
the same year (1886) by the Westinghouse Company at Greens- 
burg, Pa. 

In 1887 the building of the first Chicago station was com- 
menced on the site of the present 120 West Adams Street 
building. The station was finished and put in operation on 
August 6, 1888. 

The closing years of the first decade of central-station 
development were signalized by the first electrical congress and 
exposition of any consequence held in Europe, and which was 
held at Paris, in 1889. In that year, I believe, the first Brooklyn 
station was put in operation. It is rather interesting to note 
that it was at the Paris Electrical Congress of 1889 that the 
watt was authoritatively defined as the unit of electric power. 
Prior to that time we did all our metering on a lamp-hour basis, 
and for many years after that most of the Edison companies 
did their metering on lamp-hour basis. 

It was about this time that stations were started generally 
throughout the world. The English manufacturers had become 
interested in the industry, and more especially the great house 
of Siemens & Halske, of Berlin, became interested in the 
industry. The first plant was built in Berlin in the later 
eighties, and about 1887 the first modern type of machine 
with direct-connected generators, made in the shops of Siemens 
& Halske, was installed in the first station of the Berlin com- 
pany. 

It took about three decades, thirty years, to establish the 
commercial value of gas. Owing partly to the differences in 
general conditions of living, and partly to the better original 
invention, it took but one decade to establish the commercial 
possibilities of the electric-power and electric-lighting industry. 

GREAT EXPANSION OP THE SECOND DECADE 

We now enter upon the second decade of central-station 
development. As I have said, the first decade was occupied 



A STORY OF THREE DECADES 351 

with laboratory experiments and what you might call the com- 
mercial experiments; but it was in the second decade of the 
business that the real commercial development took place. I 
am inclined to think that the main causes for the great increase 
in the business from the year 1890 to 1900, which practically 
forms the second decade of central-station development, can 
be traced to the commercial end of the business entirely. 
In the early part of that period, the first half of that period, 
the years extending from 1890 to about 1895, we first began to 
learn something about the underlying principles necessary to be 
mastered in order to produce a proper balance sheet. In other 
words, we first began to learn something about the way to 
sell our product. I think it is a fair statement to make that 
there was not a man in the central-station business prior to 
1890 who understood anything about the principles controlling 
the proper disposal of the product that he manufactured. 

While Europe had to come to this country to learn some- 
thing about the underlying principles of engineering of central- 
station development, we had to go to Europe to learn something 
about the principles underlying the sale of the product. I 
think we owe more to Mr. Arthur Wright, who sometime in the 
early nineties was the manager of the municipal plant at 
Brighton, England, than to any other one man so far as teach- 
ing us the fundamentals governing the sale of our product. I 
have no recollection of hearing anything, except in the most 
general terms, about load factor, or the necessity of long-hour 
customers and the desirability of selling to them at a lower 
price than to short-hour customers, until I first met Mr. 
Wright, and saw what he was doing in that direction in the 
city of Brighton. 

The lessons he taught us are the commonplaces of today. 
We still have a few people who don't agree with us, or who sell 
their product on what we call a flat-rate basis; but I suppose 
99 per cent of the people in the central-station business have 
come to the conclusion that the only way to sell energy is on a 
basis that gives to the man who uses it the greatest amount of 
time during a given period the least possible price. 



352 ADDRESSES OF SAMUEL INSULL 

COMMERCIAL DEVELOPMENT OF AN ENGINEERING BUSINESS 

The reason I am dwelling on this particular point is because 
I wish especially to present to you here this evening the great 
importance of the commercial element in the development of 
what is an engineering business. The sale of our product in 
larger quantities than it had been sold heretofore, starting, as 
I say, in the nineties has, in my judgment, been the main cause 
which has forced most of the developments that have taken 
place since the original three-wire system was brought into use, 
and since the first alternating-current plants were established 
by the Westinghouse company. 

This large-quantity sale led to a greater density of energy 
consumption in a given area. That led, of course, to greater 
demands for larger sized generating units, and that led to the 
production of modern types of engines of larger sizes as com- 
pared with anything we h.ad used with belted generators, and 
ultimately to other developments. 

The first electrical power transmission system established 
in this country was established in 1890, connecting a small 
Colorado town with a mine some miles outside the town. The 
year 1891 gave us direct-connected units in this country of 
higher efficiencies and lower speeds. The year 1893 gave us 
the World's Fair at Chicago, which, above everything else that 
had occurred up to that time, was an electrical display and one 
that was well worthy of the development that had been attained 
in the art up to that date. 

In 1894 the most economical station built up to that time 
was started in Chicago the Harrison Street station with 
modern types of marine engines. I think it was the second or 
third station of that kind built in this country. There was one 
here in New York, and another in Milwaukee, I think, that 
preceded it. But it was the first time that energy had been 
produced at anything like a moderate cost a cost which, 
however, more nearly approaches our selling price of today than 
our cost. 

Probably the next most important development that took 



A STORY OF THREE DECADES 353 

place was copying the experiences of the first transmission sys- 
tem in Colorado, and also more formidable work of the same 
character that had taken place in Europe, and applying it to 
central-station practice. The first rotary converters used 
in connection with an Edison central station anywhere were 
started by the Brooklyn Edison Company and the Chicago 
Edison Company in October, 1897, and I believe the engineers 
of the two companies are still disputing in relation to the 
claim of priority. 

LARGE UNITS INTRODUCED IN THE THIRD DECADE 

This brings us to the modern central station and distribu- 
tion system. The three-wire distribution system, the rotary- 
converter station, the high-tension transmission cables and 
the direct-connected large-sized reciprocating-engine alternat- 
ing-current units form what was in the year 1900, or a little 
later, the best form of modern central-station practice. The 
massing of production of energy in large quantities, the cheap- 
ening of the relative cost of investment and the cheapening 
of the cost of operating in fact, the lessons learned through 
the second decade of central-station development, which was 
the period of commercial development practically forced 
the introduction of still larger units as prime movers. The 
reciprocating engine reached its limit, practically, at 5,000 to 
6,000 kilowatts. Six thousand kilowatts is a pretty high amount 
for a reciprocating engine to produce, and those of us who were 
engaged in the distribution of large amounts of energy were 
looking for some other means of central-station production. 
That was at the close of the second decade of the development 
of our business. 

The steam turbine, developed by the Hon. Sir Charles A. 
Parsons in England, had gone along relatively slowly. We had 
seen one or two of them in this country. I think my friend, 
Mr. Bowker, brought the first one to the United States. (Mr. 
Williams 1 corrects me and says that the first turbine brought 

1. Mr. Arthur Williams, general inspector of the New York Edison Com- 
pany and past-president of the National Electric Light Association. 



354 ADDRESSES OF SAMUEL INSULL 

here by Mr. Bowker was the De Laval.) Then the Westing- 
house Company brought over some small Parsons turbines, and 
Professor Curtis commenced his experiments on what has 
been developed into the Curtis steam turbine, as made by the 
General Electric Company. 

I can well remember, as a result of a trip made by Mr. 
Frederick Sargent, our consulting engineer, and Mr. Louis A. 
Ferguson, our second vice-president, to Europe, I think about 
the year 1899 or 1900, that I was ready to listen with a more 
receptive ear to the suggestion of Mr. Coffin, president of the 
General Electric Company, that he should build a steam turbine 
of the Curtis design for one of our Chicago stations. 

SOME INSIDE HISTORY ABOUT THE FISK STREET STATION 

Mr. Coffin wanted, on the advice of his engineers, to build 
a 1,000-kilowatt machine, or a 1,000 horse-power machine I 
forget which. I pointed out to him that we had reached a point 
in central-station development that enabled us to get recipro- 
cating engines of 5,000 or 6,000 kilowatts, and that to make a 
steam turbine of a fifth that size would be a step backward. 
We had long negotiations on the subject, and it resulted in the 
General Electric Company building for our Fisk Street station 
in Chicago the first large steam turbine of any make erected 
and operated on either side of the Atlantic. The shell of that 
turbine, I believe, has been erected as a monument to the art 
in the yards of the Schenectady works, and to my mind it is a 
monument to one of the greatest developments that has taken 
place in connection with our industry. 

The ability to mass very large amounts of energy produc- 
tion, the ability to do that at a very low investment cost, and 
to produce the energy from such machinery at an operating 
cost never heard of with reciprocating engines and at an effi- 
ciency never heard of with reciprocating engines, has, to my 
mind, had a greater influence on the development of our business 
during the last decade than any other one thing. True, we 
were looking for some means of producing energy in greater 



Typical Substations of the Commonwealth Edison Company, Chicago 




Sixty-second Street 






Whipple Street 




Harding Avenue 



A STORY OF THREE DECADES 355 

quantities at lower cost, and under circumstances of greater 
reliability than production could possibly be with a reciprocat- 
ing engine, as compared with the low investment cost, low 
bearing cost, and great reliability of a rotating prime mover; 
but the fact is that in agreeing to take the risks of manufacture, 
and to give the industry something which it needed badly, 
I think the central-station side of the business owes a great 
deal to the courage of my friend Mr. Coffin in developing the 
turbine business in this country rather from the point of view 
of large units downward than from the point of view of small 
units upward. 

The history of the last decade, bringing us directly up to 
today or yesterday, has been one of marvelous progress in our 
industry, but, to my mind, it is but the start of what we can 
expect may come in the future. 

PRESENT-DAY MASSING OF PRODUCTION 

It seems to me that the true function of a central-station 
company is to produce all of the energy used in the community, 
not necessarily limited to the territory in which it now operates, 
but in the community of an area which it can economically 
reach. Some years ago I used to talk, whenever I went to 
Europe, with my friend Dr. Rathenau, the head of the great 
Allgemeine Electricity Company of Germany, on the subject 
of central-station areas. I think I first got from him the 
idea that I should look a little beyond my nose, and see if there 
was not some territory outside of the narrow limits in which I 
was then operating which could be economically reached from 
a large generating station. I do not think we have any con- 
ception of the savings that can be effected by concentration of 
production and distribution. I have tried to figure somewhat 
on the subject myself; but when one takes into account the 
remarkable growth of the large centers of population, especially 
in this country, it is almost impossible to figure the possible 
savings that dan be produced by concentration of production 
and concentration of distribution. 

We are living in an era when our public men look askance 



356 ADDRESSES OF SAMUEL INSULL 

at the encouragement of monopoly generally industrial 
monopoly but fortunately we are engaged in a business 
which, it is generally recognized, can be run more economically 
as a monopoly, and which is generally subject to legislative 
regulation. 

CULTIVATE THE GOOD WILL OF THE PUBLIC 

Before I take my seat I want to talk to you the same way 
that I talk to my own "boys" on the subject of your personal 
responsibility to the business in which you are engaged. I 
always say that it makes no difference to me whether the posi- 
tion occupied by a man be that of general manager or coal 
passer. More or less all men who work for public-service 
corporations are in the public eye. I do not care whether it is 
the head of the business, whose name most frequently appears 
in the newspapers, or whether it is the man occupying a subor- 
dinate position both are in the public eye, so far as our busi- 
ness is concerned. If our business is to be permanently suc- 
cessful; if we are to obtain and hold the good will of the com- 
munities in which we operate; if we are to be allowed by the 
governmental bodies having charge of such matters, whether 
legislative or administrative, to extend our monopolies we 
must defer to public opinion. I think that all our people should 
try to achieve the highest possible standing in the community 
in which they live. They should bear in mind that their per- 
sonal conduct for good or ill is an addition to or subtraction 
from the good will which the public bears towards the busi- 
ness on which we are all dependent for our livelihood. 

I do not know of any business that offers the opportunity 
to the average man, not necessarily to the man of great ability, 
but to the average man, as that offered by our business. I do 
not know of any business that is less affected by changes in 
general conditions of business than our business; that gives 
greater continuity of service. The message that I want to 
leave with you is one which will lead every man in this room to 
feel a personal responsibility with relation to the success of 
the Edison Electric Illuminating Company of Brooklyn. 



THE PRODUCTION AND DISTRIBUTION 
OF ENERGY 1 

THE FIGURES that have been so ably presented are 
certainly somewhat staggering. I do not think I 
have ever heard them presented in exactly the same 
form before. While it is my duty tonight, and my pleasure, 
to address you on the subject of the generation and distribution 
of energy that is, electrical energy I have no intention, ex- 
cept in the most incidental way, to refer to the work that we are 
doing in Chicago. Whenever I have addressed a similar body 
on the subject of the economical production and distribution 
of energy I have usually referred to the means of production in 
great cities and the distribution of energy for use in those cities, 
and have tried to demonstrate that the truly economical 
method to pursue is the manufacture and distribution of all 
such energy under one organization. In discussing this sub- 
ject, especially in the address given in the city of New York, 
before the American Institute of Electrical Engineers about a 
year ago, I have referred to the necessity of having very 
large prime movers a necessity which undoubtedly exists, in 
order to get economical production in large cities; but this 

1. A lecture delivered before the Franklin Institute in Philadelphia on 
March 19, 1913. In this address the author gave the most elaborate and 
scientific exposition that he had yet attempted of the benefits of concentrating 
the production and distribution of electrical energy over wide areas. The 
Franklin Institute of the State of Pennsylvania, to employ the official name, 
was incorporated in 1824. During its long and honorable career it has dis- 
seminated much information on nearly every subject connected with the useful 
arts. To a considerable extent the Journal of the Franklin Institute has been 
the medium of this communication. The present chapter is reprinted, with a 
few changes, from that publication. Mr. Walton Clark, as president of the 
Franklin Institute, introduced Mr. Insull. In doing so he sketched briefly 
the rapid development of Chicago's electrical interests, giving figures and data, 
referring also to the active part taken in such development by Mr. Insull. The 
opening sentences in the text refer to the introduction. 

357 



358 ADDRESSES OF SAMUEL INSULL 

evening I intend to give my attention, and to ask you to give 
your attention also, to exactly the opposite point of view. 
I purpose to take the smallest prime movers that I have had 
anything to do with in the smallest generating stations in the 
rural and agricultural territory of Illinois, and, starting from 
that point, to draw your attention to the various uses to which 
electrical energy can be put in performing the various duties 
required of it, for the benefit of the local farming community, 
the small country towns surrounded by such farming com- 
munities, the lowlands of the state requiring drainage, the 
mines of the state requiring electrical power, and the inter- 
urban roads traversing the state and requiring energy for the 
propulsion of their cars. If time will permit, I will endeavor 
to show you that the true economic method of the production 
and distribution of energy for all these purposes, and for some 
other purposes to which I will incidentally refer, necessarily 
involves, so far as a state-wide service is concerned, concentra- 
tion of production, concentration of distribution, and, if you 
may choose to call it so, monopoly of administration of the 
business of producing and distributing electrical energy. 1 

ELECTRICAL REQUIREMENTS OF LAKE COUNTY, ILLINOIS 

I now come to the main part of my lecture. The reason I 
have chosen the Lake County district and surrounding ter- 
ritory, shown in Fig. 1, which is the extreme northern corner 
of Illinois, facing on Lake Michigan, is that this probably is the 
poorest territory for the purpose of central-station distribution 
that it has been my fortune to operate in. The plants were 
acquired in that territory in the year 1910. 

The towns marked by the crossed-circle emblem are twelve 
in number, with a population of 7,886. Those marked by a 
solid black dot are the only towns in the territory which had 
electric service, and that at night only. 

1. Mr. Insull here repeated four of the charts showing the energy require- 
ments, with diversity factors, of New York and Chicago, previously given in 
his A. I. E. E. address on "The Relation of Central -Station Generation to 
Railroad Electrification." 



STATE-WIDE SERVICE 



359 



The next chart, Fig. 2, shows the condition two years later, 
in 1912. There are only two places in the county without elec- 
tric service. There are twenty towns served, having a popula- 
tion of 22,188 people, and there are 125 customers, which are 
mostly farmers, outside the corporate limits of any of the vil- 
lages in that territory. 



;-WISCONSIN LINE 



LAKE COUNTY 



NUMBER POPULATION 
$ 1 7.88* 




YEAR 1910 

e TOWNS OF OVER 3OO POPULATION WITHOUT ELECTRIC SERVICE 
TOWNS WITH ELECTRIC SERVICE ( AT NIGHT ONLY) 

Fig. 1. Map of Lake County (Illinois) District in 1910 

Fig. 3 shows the distribution system outside of one of the 
villages which serves a number of farms. Some two years ago, 
when that territory was taken over, an isolated plant was 
acquired which a gentleman farmer who had a very large farm 
in this vicinity had installed and which supplied a few of the 
neighboring farmers in addition to the owner's requirements, 
forming the nucleus of the rapidly developing load of this 
territory. The main circuit is installed on the same poles 
with the transmission lines. 

The monthly variation in energy used on 68 farms is shown 



360 



ADDRESSES OF SAMUEL INSULL 



ILLINOIS-WISCONSIN LINE 



NUMBER POPULATION 




9 TOWNS OF OVER 30O POPULATION WITHOUT ELECTRIC SERVICE 

10WMS Or OVER 300 POPULATION WITH 24 HOUR ELECTRIC SERVICE 

CUSTOMERS OUTSIDE OF TOWNS WITH 24 HOUR ELECTRIC SERVICE 

Fig. 2. Map of Lake County (Illinois) District in 1912 




Fig. 3. Rural Distribution System 



STATE-WIDE SERVICE 



361 



in Fig. 4. The annual kilowatt-hours for light were 23,609 
and for power 62,259. The lighting was 27.5 per cent of the 
total, and the power 72.5 per cent. The highest consumption 
comes in the middle of summer, which is the opposite time to 
the highest consumption in the adjacent towns. 



9,000 
8,000 
7,000 
6,000 
5,000 
4,000 
3,000 
2,000 

1,000 


M 
























9.000 
8,000 
7,000 
6,000 
5.000 
4.000 
3,000 
2.000 

1.000 


:. 












> 


TOTAL 






















/ 




\ 
















/ 








\ 














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4-'' 


N x 




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\ 




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/ 


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/ 


/ 
/ 








\ 

N 




I 


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/ 


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% 




I 


IX 


/ 




/ 


ENERC 
LA 
SHOW 

LIGHT 
POWER 


Y USED ON 68 FARMS IN 
KE COUNTY DISTRICT 
NG MONTHLY VARIATION 

ANNUAL PERCENT 
K W.M. SOLD Of TOTAL 


\ 
4 
I 




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$ 

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1 




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if 


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6?,e$9 72. 5 


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N. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV. DE 



Fig. 4. Use of Electricity on Farms, Illinois, 1912 

Two typical farm-load diagrams are given in Fig. 5. They 
indicate, the same as the previous chart, that rural or farm 
load has its maximum in summer. They are plotted from actual 
readings taken at the substation. The maximum occurred 
on the day before the Fourth of July, and the unusually high 
evening lighting peak is explained by assuming that the city 
people came out the evening before to spend the Fourth at their 
country places. 



ADDRESSES OF SAMUEL INSULL 

While these curves may not be entirely representative of 
general farming load, because there are several large farms 
owned by wealthy city people whose freer use of electricity 
probably influences the total, nevertheless they include a 



LOAD DIAGRAM 

LAKE COUNTY FARM CIRCUIT 

MAXIMUM K.W. JULY 3. 9:3OA.M 




Fig. 5. Typical Farm-Load Diagrams 

large number of average-size farms conducted by farmers of 
average means. The curves are probably an indication of the 
development that is possible for this class of business. 

Table I gives some actual statistics on these same 68 farms. 
The figure of 2.4 horse-power for motors connected is very low 
indeed, and should eventually increase several times as this 
business is developed. 



STATE-WIDE SERVICE 363 

TABLE I. DATA ON LAKE COUNTY FARMS 

Total number of farms 68 

Average acres per farm 162 

Per farm Per acre 

Incandescent lamps in 50- watt equivalents 30.5 .... 

Motors in horse-power 2.4 .... 

Total connected load in kilowatts 3.3 

Annual light kilowatt-hours 347 2. 14 

Annual power kilowatt-hours 916 5 . 65 

Total kilowatt-hours 1263 7.79 

Income from light $41.60 26c 

Income from power 55 .90 34 

Total income $97.50 60c 

Fig. 6 shows a comparison of two winter-day load diagrams 
prorated to the same maximum, in order to show the growth 
of the day load in the Lake County territory and the consequent 
improvement in the load diagram and load factor as compared 
with the average local town plant, of which the diagram of 26 
towns recently taken over is typical. 

I am dwelling at some length on this particular territory 
because it is not a manufacturing district and there are very 
few towns in it. The suburban district tributary to Chicago, 
as shown by the map (Figs. 1 and 2), has been cut out of the 
figures. 

The annual load-factor figures show what can be done in 
the way of improvement by unified control. The annual 
load factor of 26 towns recently taken over was only 22.6 per 
cent, while the load factor of the Lake County district, after 
two years of unified control, has been brought up to 28.9 per 
cent. For comparison, it may be stated that one of the large 
cities down the state has a load factor of 30.8 per cent, and the 
Chicago light-and-power annual load factor, exclusive of rail- 
way service, is 34 per cent. 

Table II (page 365) gives comparison of cost of energy, 
investment cost and operating cost under the old plan, when 
there were a few isolated central stations in small towns, with 
cost of energy for the same territory two years later from a 
modern station, transmission and substation system. The 



364 



ADDRESSES OF SAMUEL INSULL 



total cost of these old stations, not including the distribution 
systems used in the towns, was $178 per kilowatt. In abandon- 
ing these stations and building transmission lines from a town 
on Lake Michigan, where we could get cheap energy, and 



ARISON OF WINTER DAY LOAD DIAGRAM 

RO-RATED TO SAME MAXIMUM 
SHOWING IMPROVEMENT I 



26 TOWNS RECENTLY TAKEN OVER 
LAKE COUNTY DISTRICT 
LARGE CITY DOWN STATE 
CHICAGO LIGHT AND POWER 




Fig. 6. Diagram Showing Benefit of Unified Control 

building local substations, you will see the cost was brought up 
to $382 per kilowatt. Under the old scheme the fixed charges 
for investment per kilowatt was $20.85, and under the new 
scheme two years later the charge was $42.60. These figures 
would seem to indicate rather a prohibitive proposition, so 
far as the new scheme of unification is concerned, as compared 



STATE-WIDE SERVICE 365 

with small isolated stations. But if you go a little lower down 
you will see that under the old scheme we had only 14.6 per 
cent load factor, whereas with a unified system of power we 
had 28.9 per cent load factor. 

TABLE II. COMPARISON OF COST OF ENERGY 

Lake County District 

1910 1912 
Investment per kilowatt of maximum 

Generating station $178 $122 

Substation . . 70 

Transmission . . 190 

Total $178 $382 

Fixed charge on investment per kilowatt of maximum $20 . 85 $42 . 60 

Maximum kilowatts 573 963 

Load factor 14.6% 28.9% 

Costs per kilowatt-hour at local plant or substation 

Fuel 2.04c .61c 

Other operation, including substation and trans- 
mission 3.42 .56 

Fixed charges on investment 1 . 62 1 . 68 

Total costs 7.08c 2.85c 

Showing a saving in supplying this district from unified power supply and 
transmission system of 4 . 23 cents per kilowatt-hour. 

Applying these respective load factors to the fixed charges 
on investment you will find that the fixed charge per kilowatt- 
hour figures out only a mere fraction higher under the new 
scheme, owing to the great difference in load factor. 

If you go still lower down you will find that the fuel cost 
under the old scheme is 2.04 cents, whereas under the new 
scheme it is 0.61 cent. The substation and transmission op- 
erating and other station operating expenses are relatively even 
lower under the new scheme than under the old. 

These operating costs include not only the station cost but 
the operation and maintenance of transmission lines and sub- 
stations and the losses in transmission from station to sub- 
station, also the conversion loss in the substation; but the 
figures do not include in either case any local distribution ex- 
pense or general expense. So that when you come to total up 



366 ADDRESSES OF SAMUEL INSULL 

these figures, notwithstanding that apparently you start out 
with over twice the investment, you will find your base cost 
per kilowatt-hour at the local lighting plant or substation 
under the old plan was 7.08 cents per kilowatt-hour, and under 
the new plan 2.85 cents, showing a saving of 4.23 cents per 
kilowatt-hour. 

Table III gives us some further figures on this same Lake 
County territory. 

TABLE HI. L\KT. COUXTT DISTRICT 



Number of towns served 
Number of customers . . 




Connected lo*d in kflowatts 2,033 4,503 

Efcrntt-hoarssoU... 699,574 1,898,978 

Kilowatt-hours sott per cmpft* 4o 86 




REQUIREMENTS OF VARIOUS ILLINOIS UTILITIES 

Fig. 7 is a load diagram showing general light-and-power 
requirements for the maximum day in 26 Illinois towns. 

These are the actual load curves for 26 plants, and it will be 
noted that those for Northwestern Illinois show a very much 
better day load than those for Central Illinois, probably due to 
the fact that the Northwestern Illinois properties were acquired 
about a year earlier and the power load has been better devel- 
oped. The Lake County diagram still further emphasizes 
this point. 

The total-light-and-power diagram for the state has been 



STATE-WIDE SERVICE 



367 



prorated from this diagram, and while this probably gives us 
the approximate diagram and kilowatt-hour output for the 
state for this present winter, the improvement in load factor 
and increase in kilowatt-hour output should be very rapid; that 
is, we might have estimated the total light and power for the 
state based on the Lake County diagram, which would have 



12 2 



2.400 



2,000 



1,600 



2,400 



2,000 



1,600 




1.200 



1,200 



Fig. 7. Maximum-Day Diagram, Illinois, 1912 

given a greater output and better load factor and which would 
probably be a very close estimate to the actual figures. 

Fig. 8 is the load diagram of five interurban roads in North- 
ern Illinois. The annual load factor is 47 per cent. The 
maximum load comes on a summer holiday. 

The heavy fluctuations of interurban load require, in case of 
separate power plant for interurban supply only, a greater 



368 



ADDRESSES OF SAMUEL INSULL 



reserve capacity than if supplied from a station serving several 
classes of business. 

The total kilowatt-hour output for the 62 interurban and 
street railways in the state, outside of Chicago, has been 
estimated, from these five and two other roads, on three different 
bases that is, per passenger, per car-mile, and per car 



10 12 



15,000 



4,500 



4,000 



3,500 



[3,000 




Fig. 8. Railway Load Diagram, Illinois, 1912 

and the three figure out very closely. The total curve for the 
state has been prorated from these curves, using this output. 

Fig. 9 shows a water-pumping load diagram of three North- 
ern Illinois plants, the kilowatt-hours per thousand gallons 
amounting to 2.81. You will see that the maximum comes 
hi the summer, and it is possible so to arrange this production 
that it is practically off-peak business. Most of the small 



STATE-WIDE SERVICE 



369 



water-pumping plants in the small central western towns pump 
to a reservoir in an elevated position, so that the question of 
exactly when the pumping shall take place is not a serious 
matter, except in case of fire. As a rule, that class of busi- 
ness gives a load factor of about 50.5 per cent. 



WATER PUMPING LOAD DIAGRAM 
TOTAL OF 3 ILLINOIS PLANTS 




Fig. 9 

Fig. 10 shows a diagram of an ice-making load for six 
plants in Chicago. The motors installed amount to 2,424 
horse-power, and the annual load factor is 42.7 per cent. Con- 
tracts are made so that the operations shall cease at the time 
of maximum load for a period of a few hours per day for four or 
five months in the winter, which is not objectionable in that 
business. The reason we have taken these six plants is because 



370 



ADDRESSES OF SAMUEL INSULL 



they are about of a size that is generally used in the small 
towns throughout the state, and therefore the load curves would 
apply equally well to the country as to the city. 

DRAINAGE AS A CENTRAL-STATION LOAD 

An entirely different class of business is illustrated by 
Fig. 11. This map and the data that I give here and on the 



10 12 2 



P.M. 

6 



10 



1,800 
1,600 


























1,800 
1..600 
1,400 
1,200 
1,000 
800 


























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1,000 
800 
600 
400 

200 













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DIAGRAM. 
OF 
ICE MAKING LOAD 




















(0 






FOR 6 PLANTS IN CHICAGO 






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ANNUAL LOAD 


FACTOR 42.7% 
































1-1 




1 






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200 



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Fig. 10 

next three maps or diagrams refer to the Illinois River drain- 
age districts, and we present them as an interesting illustration 
of the use of electricity from a transmission system. 

Between the bluff lines, which run approximately parallel to 
the river, is a wide flat valley which is subject to overflow at 
times of high water, but when reclaimed, by building dikes 



STATE-WIDE SERVICE 



371 




372 



ADDRESSES OF SAMUEL INSULL 




STATE-WIDE SERVICE 



373 



around suitable areas and draining and pumping out the sur- 
plus water, extremely fertile land is made available. The 
load factor of the business by itself, being less than 12 per cent, 
does not warrant the installation of a generating and trans- 
mission system for this supply by itself, but when combined 
with other uses of electricity in the same territory it is valuable 



SHOWING MONTHLY VARIATION 
IN PRECIPITATION AND 
ENERQV REQUIREMENTS 




business, as it is altogether off-peak. A cheap power supply 
should greatly accelerate the reclamation of swamp and over- 
flow land throughout the country. 

Fig. 12 shows in detail one section of the preceding map. 
You will see the lines of the bluffs on either side, and the 
shaded areas are the various districts which have already been 



374 



ADDRESSES OF SAMUEL INSULL 



reclaimed or which it is proposed to reclaim. The pumping 
station is always located at the best point in the district to 
drain all the land and to return the water to the river. It is 
quite an advantage sometimes to locate more than one pump- 
ing station in a district, because of topographical conditions 
involving quicker and better drainage. This is perfectly 



7,500 
6,750 
6,000 
5,250 
4,500 


22 4 6" 8 '10 12 2 4 6 ' 8 10 12 




MAX 


/DM t 


AY OF 


YEAR 


IN SP 


IINQ 












6,750 


















































































E 

ILLIK 


STIMATED LOAD DIAGRA 
013 RIVER DRAINAGE DlSTR 


M 
ICTB 














5,250 
4,500 
3,750 
3,000 
2,250 
1,500 

750 



























































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2 


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2,250 
1,500 
750 

























































































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1 


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Fig. 14 

practicable with motor drive, while it is usually out of the 
question to build two steam plants in the same district. A 
co-operative plant and transmission, as was planned for the 
entire district, involves an expenditure of approximately 
$1,335,000, while a public-utility company, with transmission 
lines practically along the entire valley, in order to supply local 
towns, can take care of this same business at an expenditure of 



STATE-WIDE SERVICE 



375 



not over $411,000. The cost of co-operative output per 
kilowatt-hour figures at least three cents higher than the cost of 
supply to a public-utility company. 

The monthly variation in precipitation and energy re- 
quirements is shown by Fig. 13. The high peak there is partly 
owing to the melting of the winter precipitation stored in the 



10 12 




15,000 



10,000 



,000 



40,000 



35,000 



30,000 



25,000 



20,000 



15.000 



10,000 



5.000 



Fig. 15 

form of snow and ice, and partly owing to high water, requiring 
greater energy to pump against. 

In Fig. 14 is given an estimated load diagram of the drain- 
age business. In the winter days it is not an important matter. 
The contracts are drawn so that we have a right to cut off the 
supply for a period of three hours, and consequently it becomes 
absolutely an off-peak business. 



376 ADDRESSES OF SAMUEL INSULL 

GOAL-MINING AND OTHER REQUIREMENTS 

The coal-mining load (Fig. 15) has been estimated by mining 
engineers from an experience dealing with the whole state of 
Illinois and from actual load diagrams of two mines which are 
operated largely electrically. These data indicate about 1.63 



5,ooor 



10 12 



32,000 



28,000 



24,000 



20,000 



16,000 



12.000 



8,000 



4,000 



ESTIMATED LOAD DIAGRAM 
RURAL LIGHT & POWER 

TOTAL FOR ILLINOIS 

BASED ON S'/JK.W.H. 
PER FARM ACRE PER YEAH 

EST.MATEO LOAD FACTOR 35% 




36,000 



32.000 



28,000 



24.COO 



20,000 



16,000 



12,000 



8.000 



4,000 



Fig. 16 

kilowatt-hours at the mine per ton of coal produced. We 
applied this figure to the total tonnage of the state, which is 
approximately 50,000,000 tons, produced by 845 mines. Of 
these, 586 mines, producing about 5,000,000 tons, are eliminated 
as local mines too small to equip electrically. There is added 
the estimated load for some forty washing and re-screening 
plants, and then transformer and line losses. The load factor 
for the individual mines figures about 20 per cent, due to the 



STATE-WIDE SERVICE 377 

fact that the mines are operated only a little over one-half of 
the number of days per year; but there is considerable diversity 
between the mines, as one day a mine or group of mines shuts 
down, and another day some others, so that the load factor for 
all the mines is brought up to about 25.6 per cent. Further, 
the diversity is large, as it is practically off-peak business, the 
men all quitting work at 4 p.m. and being out of the mines be- 
fore 4:30 p.m., that being earlier than the average evening 
load for other purposes in the territory. 

In Fig. 16 is shown a load diagram of the total power for 
rural Illinois based on 2.5 kilowatt-hours per farm-acre per 
year. We have taken the Lake County figures of 7.79 kilowatt- 
hours per farm-acre and cut it two-thirds, so as to be absolutely 
safe in our figuring. The Lake County figures, to my mind 
as we had only two years to make any development are 
very low indeed, and I believe that the maximum demand for an 
ordinary farm will greatly exceed in future years 7.79 kilowatt- 
hours per acre, so that we cannot go very far wrong, so far as 
minimum possibilities are concerned, if we take one-third of 
what we are doing and assume that to be the consumption per 
farm-acre. You will notice the load factor is 35 per cent, and 
that the maximum, as I told you before, comes in the summer. 

ELECTRICAL REQUIREMENTS OF THE STATE OF ILLINOIS 

We come now (Fig. 17) to the marshaling of the figures 
that have been given in the previous curves. We take the 
state of Illinois, outside of Cook County and outside of a 
small suburban district in Lake County, and we find that on 
the lowest possible estimate the total light and power is 99,800 
kilowatts on December 18th. The interurban and street 
railways used 81,500 kilowatts on a summer holiday, when their 
maximum comes. The town water-pumping takes 29,290 
kilowatts and the ice-making 16,575 kilowatts. Coal mining 
takes 38,530 kilowatts between 4 and 4:30 p.m. some day in 
November or early in December. The rural light and power 
takes 33,125 kilowatts in the summer. Drainage pumping re- 



378 



ADDRESSES OF SAMUEL INSULL 



quires 7,125 kilowatts in early spring. Thus we have a total 
of 305,945 kilowatts if you disregard altogether the time at 
which the maximum demand comes. 

Now the generating plants, the transmission lines and the 
substations have to be designed and constructed to take care 
of the maximum demand made on you on one given day of the 



100. 



80,000 



0,000 



70,000 



60.000 



100,000 



90,000 



80,000 



70,000 



80,000 



ILLINOIS EXCLUSIVE OF COOK COUNTY 
FOR DAYS OF MAXIMUM 




50,000 



40,000 



30,000 



20.000 



10,000 



50,000 



Fig. 17 

year, which is the day on which you get the highest demand from 
all those businesses put together. With a separate generating 
and transmission system for each kind of supply, you have got 
to provide the investment necessary for that total of 305,000 
kilowatts, so far as generation and primary distribution are 
concerned. What I mean by primary distribution is the 
transmission lines that go through the country to substations, 
which transmission lines are operated at relatively high pressure, 



STATE-WIDE SERVICE 



379 



the pressure being reduced at the substations where the energy 
enters the local distribution system. 

Fig. 18 tells the story, graphically, of the saving effected. 
The town light-and-power load comes about 5:30 on Decem- 
ber 18th. The demand of the interurban and street railways, 
which is 81,500 kilowatts in the middle of summer, is down to 



A.M. 

4 6 8 10 



TOTAL LOAD DIAGRAM 

ILLINOIS EXCLUSIVE OF COOK COUNTY 

DAY OF COMBINED YEARLY MAXIMUM 

5.30P.M. DEC. *8 



TOWN LIGHT POWER 
INTERURBAN STREET RY. 
TOWN WATER PUMPING 
ICE MAKING 
COAL MINING 
RURAL LIGHT * POWER 
DRAINAGE PUMPING 
TOTAL 



300,000 



240.000 



200,000 



160.000 




120.000 



240,000 



200,000 



160,000 



120,000 



80,000 



40,000 



Fig. 18. Utilization of Diversity on a State-wide 
Scale 

78,460 on December 18th. The town water and pumping is 
down from 29,290 kilowatts in the middle of summer to 17,430 
kilowatts on the day of your maximum load. Ice-making goes 
down from 16,575 in the middle of summer to 245 in the middle 
of winter; coal mining from 38,530 at the time of its maximum 
demand for energy to 4,975 at the time of your maximum load 
in winter. The rural light-and-power load of 33,125 in the sum- 



380 ADDRESSES OF SAMUEL INSULL 

mer goes to 24,990 on the day of your maximum load. Drain- 
age pumping load of 7,125 kilowatts in early spring is entirely 
off at the time of your maximum load in winter, and the 305,945 
kilowatts of total demand, irrespective of the time when that 
demand comes, is reduced to an instantaneous demand of 
225,900 kilowatts, or a difference of 80,045 kilowatts, or, to 
express it otherwise, a diversity of 35.4 per cent. 

There is one set of figures that we have left out of these 
estimates. I refer to the amount of energy that would be 
required if the steam trunk-line roads of Illinois were electrified. 
I presume that when the time comes for electrification in the 
Central West it will follow somewhat the same course that is 
being followed in the East. The passenger terminals will 
probably be electrified first, because they seem to be the 
simplest to deal with. Then will follow the freight terminals, 
and it will probably be quite a number of years before we get to 
a point where steam electrification will take place generally. 
It will probably take place east of the Alleghenies long before it 
takes place in the Mississippi Valley, because of the density of 
travel and movement of freight, and owing to density of popu- 
lation, which is so much greater east of the Alleghenies than it 
is in the Mississippi Valley. But when the time comes, as 
surely it must come, for the electrification of the great arteries of 
travel of the country, the economical way for the railroads to 
get their energy will be to get it from these plants that, in my 
judgment, will be spread, by that time, all over the states, with 
their transmission lines gridironing the various states and 
carrying cheap energy to the smallest communities, thus 
changing entirely the basis of living, and giving less reason for 
great accumulations of population for manufacturing purposes 
in given centers because of the incentive of cheap power, which 
will not be confined to those centers, but will be available 
equally in small communities and in large communities. I 
very much doubt whether the conditions of load shown in the 
last two charts would be changed if all the steam railroads 
in Illinois were run electrically, except that the condition of 
diversity would probably be increased, and consequently the 



STATE-WIDE SERVICE 



381 



condition of operation would probably be improved and the 
cost of energy would be reduced, even beyond any figures I 
can show you tonight. 



TABLE IV. SUMMARY FOR YEAR 





Kw. Hours 


Maximum Kw. 


Diversity 


Load 
factor 


Amount 


Per cent 
of total 


For 
year 


5:30 p.m. 
Dec. 18 


Amount 


Per 
cent 




238,717,500 

334,996,600 
129,562,500 
62,126,300 
86,571,500 
7,250,000 
101,562,500 


24.9 

34.8 
13.4 
6.5 
9.0 
0.8 
10.6 


99,800 

81,500 
29,200 
16,575 
38,530 
7,125 
33,125 


99,800 

78,460 
17,430 
245 
4,975 

24',990 


3,040 
11,860 
16,330 
33,555 
7,125 
8,135 




27.3% 

47.0% 
50.6% 
42.7% 
25.6% 

35'.Q% 


Interurban and street 
railway 


Water pumping 
Ice-making 


Coal mining 


Drainage pumping .... 
Farming 


Totals 


960,786,900 


100.0 


305,945 


225,900 


80,045 


35.4 


35.9% 



Load factor of combined systems 48.7%. 

Table IV sums up in figures what you have seen on the 
diagrams. It would seem to indicate and I am rather 
inclined to think it is a low estimate that the total amount of 
energy that could be disposed of at this time for the purpose of 
light and power, interurban street railways, water pumping, 
ice-making, coal mining, drainage, and general farm purposes in 
the state of Illinois, outside of Chicago, is about 960,000,000 
kilowatt-hours, or about one-fifth greater than the present out- 
put of the city of Chicago. The maximum load would be 
225,000 kilowatts combined, as against 305,000 with them 
separated, or slightly less than the Chicago maximum. 

The last column of Table IV shows you the load factor of 
all these businesses separately. The combined load factor 
of the entire system is 48.7, which is better than is obtained, so 
far as I am aware, in any large center of population in the world, 
and with an amount of output which, as I have stated, exceeds 
by one-fifth the largest output, so far as I am aware, in any 
large center of population in the world. 

Table V shows the reserve capacities, etc. I have had 
these figures prepared to show you the enormous reserve that 
small plants, as a rule, carry in Illinois. In Northwestern 
Illinois they have 78.5 per cent reserve; in Central Illinois they 
have 82.9 per cent reserve, or with 69 towns and 182,000 popu- 



382 



ADDRESSES OF SAMUEL INSULL 



lation and a maximum demand of 8,210 kilowatts they have a 
capacity of 14,600 kilowatts, being a reserve of 78 per cent. 
And yet the service under these circumstances is, as most of 
you know, very unreliable in small towns. 

TABLE V. LARGE RESERVE CAPACITY 
In Local Plants 

North- North- 
eastern western Central 
Illinois Illinois Illinois Total 

Number of towns for which information is 

available 6 16 47 69 

Population 6,885 34,459 141,376 182,720 

Maximum 415 1,897 5,898 8,210 

Capacity 475 3,385 10,779 14,639 

Per cent reserve 14.5 78.5 82.9 78.4 

TABLE VI. ESTIMATED SAVING IN PLANT INVESTMENT 

Maximum Kw. Estimated 

as separate percentage Estimated 
systems reserve requirement 

Light and power 99,800 50% 149,700 kw. 

Interurban and street railway 81,500 40% 114,100 

Water pumping 29,290 50% 43,940 

Ice-making 16,575 30% 21,550 

Coalmining 38,530 50% 57,800 

Drainage pumping 7,125 50% 10,690 

Farming 35,125 20% 39,750 

Totals 305,945 43% 437,530 kw. 

Estimated requirement, 437,530 kilowatts at $100 per kilo- 
watt $43,753,000 

Maximum kilowatts for above as combined system 225,900 kw. 

Plus 20 per cent reserve 45,180 

Total estimated requirement, for combined system. . . 271,080 kw. 

Estimated requirement, 271,080 kilowatts at $75 per kilo- 
watt $20,331,000 

Estimated saving $23,422,000 



Table VI shows the estimated saving in plant investment. 
I have had this statement prepared, giving a comparison of 
the generating-plant cost for separate plants and for unified 
systems. The saving shown cannot be made except for new or 



STATE-WIDE SERVICE 383 

additional business, and as the old plants are displaced on 
account of wearing out. However, with the rapid growth of 
all these classes of business, this investment saving can be made 
in a few years, in addition to an enormous operating saving. 

We are assuming that these plants with an estimated 
capacity of 437,530 kilowatts are put in as separate plants, 
costing $43,753,000. 

The maximum kilowatts for the combined system would be 
225,900. With 20 per cent reserve rating, which is ample, 
the total rating is 271,080 kilowatts, which at $75 per kilo- 
watt is $20,331,000, showing an estimated saving of $23,422,000. 

These figures are somewhat misleading to begin with. You 
could not handle that amount of business in the state of Illinois 
in small plants at $100 per kilowatt. The operating expenses 
of those small plants would be so great that it would be im- 
possible to quote a price that would enable you to get the 
business, so that in a way you would say that would be an im- 
possibility. It would be impossible to raise the money because 
you would be quite unable to make a showing with a series of 
separate plants. I do not know how many plants there would 
be, but they would run up into the hundreds. The only way 
to give cheap energy to a large rural community, whether it be 
to the manufacturing interests in those communities or for 
the necessities of the people, such as ice-making, or for mining 
of coal, or for the performance of public functions, such as water 
supply the only possible way that it can be carried out is by 
concentrated production, which would call for the investment 
of $20,331,000 in stations. 

To go into the matter of operating saving from that class 
of combination is almost beside the question, as that business 
can only be secured by a unified system of production having 
low investment cost in proportion to the load factor, and low 
operating cost in proportion to the load factor. To try to 
compare that with the costs of many little local plants, worth- 
less in themselves except for supplying a few lines in their 
own various communities, would not be of any particular 
advantage to us in looking into this subject, because the 



384 ADDRESSES OF SAMUEL INSULL 

figures I would have to show would be, in a way, misleading, 
as I would have to assume that it would be possible to get the 
class and amount of business with the operation of small isolated 
plants that can only be obtained by a unified system of produc- 
tion. 

CENTRALIZATION VERSUS MUNICIPALIZATION 

The figures I have presented you show absolutely that the 
business in which I am engaged can be run successfully run 
only as a monopoly. To use the taxpayers' money in putting 
in a small lighting plant in using the word "small" I speak 
relatively, meaning "small" as applied to towns with a popula- 
tion of 500 to 1000, and "small" as applied to a city of possibly 
one million or two million population, for what is small in one 
place would be relatively large in another place; but they are 
all equally small in total business obtained in any given center 
of population to put the taxpayers' money into that class 
of investment, whether it is in a little Illinois village or a 
large city in New Jersey or New York, is simply a waste of 
money. While I do not wish to enter into a discussion of any 
controversial character in an assemblage of this kind, I do not 
know of any greater argument against the municipalization of 
the production of energy than the study of the economics of 
the business in which I am engaged. A study of such figures 
as those I have brought to your attention must lead any man of 
ordinary intelligence, not necessarily with technical experience, 
but any man with ordinary intelligence, to the conclusion that 
the only possible way to operate the business of energy produc- 
tion and distribution is by operating it as a monopoly in so 
much of the territory as you may want to serve from one 
organization. It does not necessarily follow that that organi- 
zation shall cover the whole of a state or the whole of a county, 
provided the county is large enough for more than one utility. 
It does follow, however, that so far as any particular piece of 
territory is concerned, whether the energy produced be used 
for operating urban transportation, such as the surface lines 
and the underground lines and the elevated lines in a city like 



STATE-WIDE SERVICE 



385 




ILLINOIS 

TOWNS OVER 500 POPULATION 
WITHOUT ELECTRIC SERVICE 

N'umber of towns 180 

Population 1 19,200 

Population per town 660 



Fig. 19. Map Showing Conditions Early in 1913 



386 



ADDRESSES OF SAMUEL INSULL 

] TM.irr k ( I 

.hwrjYal. f\ \\ 




TOWNS WITH ELECTRIC SERVICE 
UNDER LOCAL MANAGEMENT 

Number of towns 219 

Population. 452,400 

Population per to.wn,..^,070 



Fig. 20. Map Showing Conditions Early in 1913 



STATE-WIDE SERVICE 



387 




ILLINOIS 

TOWNS WITH 24 HOUR ELECTRIC SERVICE 

UNDER GROUP UTILITY MANAGEMENT 

Number of towns 326 

Population 1,114,000 

Population per town 3,420 



Fig. 21. Map Showing Conditions Early in 1913 



ADDRESSES OF SAMUEL INSULL 

Philadelphia, or a portion of the terminal lines, or the main 
lines of the steam railroads centering in Philadelphia, or the 
lighting of your streets, or for supplying the thousand and one 
purposes that a community like this requires it for, such pro- 
duction and distribution of energy must, for reasons of econ- 
omy, be a centralized one, whether such centralization be con- 
fined to the city or the county, or possibly covering a large 
portion of the state. 

Let us consider for a moment the remaining maps and 
diagram, which may interest you. 

Fig. 19 is a map of Illinois showing towns of over 500 popu- 
lation which are without electric service, and in addition there 
is the rural district that is not served at all. Fig. 20 is a map 
showing all of the towns in the state which have service from 
local plants owned and operated by local companies, and which, 
in a majority of cases, is only a six-hour or ten-hour service. 
There are 219 of these towns, of which 19 have a population of 
less than 500. Fig. 21 is a map showing all the towns in the 

state in which the electric serv- 
ice is owned and operated by 
some group utility, which serv- 
ice is being rapidly intercon- 
nected with and operated from 
the most economical available 
source of supply. 

Fig. 22 shows graphically 
the present electric service of 
the state of Illinois, exclusive 
of Cook County, analyzed ac- 
cording to population, showing 
that portion which has no 
electric service, that portion 

which has service from local plants, and that portion of the 
population which has service from some utility group. It 
brings out the fact that a little over half of this population 
is still without service. In statistical form the facts expressed 
in Fig. 22 are as follows: 




Fig. 22. Electric-Service Analysis 
of Illinois in 1912 



STATE-WIDE SERVICE 389 

Per cent 



Supplied by utility groups 


Towns 
326 


Population 
1,114,000 


of total 
34.2 


Supplied by local plants 


219 


452,400 


13.8 


Towns without service of over 500 population . 
Towns without service of under 500 population 
Rural 


180 
1,713 


119,200 
216,300 
1,366,100 


3.6 
6.5 
41.8 











Total 2,438 3,268,000 100.0 

At this point I want to say that it would have been im- 
possible for me to prepare any such statistics and curve sheets 
as I have shown you if I had not had at my command the de- 
voted service of a large staff of statisticians, ably headed by 
Mr. Edwin J. Fowler, chief statistician of the Commonwealth 
Edison Company, and Mr. George E. McKana, assistant 
chief statistician. I think it is only fair that I should, in this 
public way, refer to the great service they have rendered me, 
and also the service rendered by the officers of the various 
companies which it is my privilege to operate, in the preparation 
of the data that I am using before you this evening. 

WHAT MAY BE ACCOMPLISHED IN PENNSYLVANIA 

But you people in this part of the country are a good deal 
more interested in Pennsylvania that is, on this side of the 
Alleghenies than you are in Illinois, which is some distance 
the other side. The figures I have given you are not merely 
theoretical figures; they are figures that have been prepared in 
connection with the operation of businesses employing a very 
large amount of capital, which businesses have been organized 
for exactly the purposes which we have set forth as hoping 
to accomplish in the diagrams shown this evening. We be- 
lieve that every corner of this country where density of popula- 
tion justifies it must have in the next few years a general cen- 
tral-station supply of electrical energy for the general use of the 
people living in the small towns and the farming districts of the 
country. When I speak of density of population being a pri- 
mary necessity, I probably exclude most of the territory lying 
west of, say, the center of the Mississippi Valley until you get 
across the Sierra Nevada Mountains and reach the wonderfully 



390 ADDRESSES OF SAMUEL INSULL 

productive territory of the Pacific Coast, extending practically 
from the Arctic Circle to the borders of Mexico. 

In the territory east of the center of the Mississippi Valley 
it is not only possible, but it is practically certain, that we shall 
see in the next few years an opportunity to get cheap electrical 
energy alike in the country community and in the large city. 
Just see what that means for a state like Pennsylvania. You 
have the advantage of low cost of production from the large 
steam-generating plants of the two large cities of Philadelphia 
and Pittsburgh at practically opposite ends of this great state; 
you have a density of population of 171 per square mile, as 
compared with 101 in Illinois. If you eliminate cities of over 
100,000 population, you have a density of 122 per square mile, 
as against 62 in Illinois. Or take your neighbor state, New 
Jersey, which has a density of population more than three times 
as great as that of Illinois, and if you will leave out the cities of 
over 100,000 population it has a density of almost four times 
that of the state of Illinois. So that what is possible for us on 
the other side of the Alleghenies is certainly equally possible 
for you people on the Atlantic seaboard. 

To come back to Pennsylvania. Besides having the ad- 
vantage of economical production at two ends of the state 
in very large centers of population, you have probably a million 
horse-power in water-power in the state. You have untold 
wealth in mines. I cannot see why it should not be cheaper to 
transport energy the short distance that it would have to be 
transported to some of the large centers of population in Penn- 
sylvania than to spend the money in transporting coal on the 
railroad. 

If it is possible to achieve anything like the cheap production 
of energy that a general unified system would bring about 
in the country districts, as comparable with the prices paid 
for energy in large centers of population, what a difference it 
Would mean to our working population ! The manufacturer has 
to go where he can get cheap raw material and where he can 
call on a large labor market. Still, there are many industries 
which can be developed in the center of a farming district, 



STATE-WIDE SERVICE 391 

where the farming population can be called upon to labor when 
they are not employed on the land. To my mind there is no 
more important factor in the great problems of life, the problem 
of how the workingman can get fresh air, the problem of how 
he can bring up his family in healthy localities, than the proper 
solving of the problem of the economical generation and dis- 
tribution of energy for country districts. 

I think it was Lord Macaulay who made the statement that 
"of all inventions, the alphabet and the printing press alone 
excepted, those inventions which abridge distance have done 
most for civilization." Lord Macaulay died before the open- 
ing of the electrical-energy era. I think if he were living today, 
he would have had in mind among the inventions which have 
abridged distance not only the telegraph and telephone, but 
he would add inventions that have enabled us to carry energy for 
the use of men at remote distances, in small towns and country 
districts. 1 

1. It may be of interest to mention here that in 1914 Mr. Insull founded 
the Franklin Medal, to be awarded from time to time by the Franklin 
Institute "to those workers in physical science or technology, without regard 
to country, whose efforts have, in the judgment of the Institute, done most 
to advance a knowledge of physical science or its applications." The medal 
is of gold and, besides suitable inscriptions, bears a medallion of Benjamin 
Franklin made from the portrait by Thomas Sully. 



INFLUENCE OF ENGINEERING ON 
MODERN CIVILIZATION 1 

FRANCIS BACON, speaking three centuries ago, made 
this statement: "There are three things which make 
a nation great and prosperous a fertile soil, busy 
workshops, and easy conveyance for man and goods from place 
to place.'* Half a century ago Lord Macaulay said, in effect: 
"The inventions which have bridged distance have done most 
for civilization." The work, or the inventions, of the engineers 
during the whole of the last century the nineteenth century 
and during the latter years of the eighteenth century were in 
the direction of bridging distance. If you take the fundamen- 
tal working invention of the steam engine by James Watt 
in the latter end of the eighteenth century, you have one of 
the fundamental elements that led to such enormous mechanical 
developments during the whole of the nineteenth century. 
Another instance is the work of Robert Fulton in connection 
with the steamboat in the early part of the nineteenth century. 
Yet another instance is the work of George Stephenson, who 
engineered and operated the first real steam railroad ever con- 
structed, the Stockton and Darlington Railroad in England, 
towards the end of the first quarter of the nineteenth century. 
The introduction of gas, I think about 1815, was an impor- 
tant contribution by engineers to the development of modern 
civilization. Morse's work in connection with the electric 
telegraph in this country and the work of Cooke and Wheat- 
stone in Great Britain, towards the end of the third decade of 
the nineteenth century, have probably, in conjunction with 
the development of the steam engine and the steam railroad, had 

1. An address delivered at Urbana, 111., on May 8, 1913, on the occasion 
of the dedication of the Transportation Building and the Locomotive and 
Mining Laboratories of the University of Illinois. 

392 



INFLUENCE OF ENGINEERING 393 

a greater effect on the development of civilization than almost 
any other contributions by engineers of the last century. This 
was followed up, soon after the middle of the last century, by 
the coupling of the two great English-speaking peoples by means 
of the submarine Atlantic cable. This achievement was one 
of the great factors that have led in more recent years to a 
better understanding between those two great peoples. From 
the time of the successful commercial establishment of the 
submarine cable to the discovery by Alexander Graham Bell 
of the principles underlying the commercial telephone of today 
was but a short period I think but little over a decade. This 
was followed about the year 1879-1880 by the rapid develop- 
ment of the electric light and power industry and the general 
use of electrical energy. My first recollection of seeing an 
electric-lighted street goes back to London, where, about the 
end of 1878, the Thames Embankment was lighted by arc lamps, 
utilizing a Russian invention called Jablochkoff candles. 
While that exhibition was going on in Europe there were a 
number of able engineers and inventors engaged in the develop- 
ment of the electrical industry here in this country. Brush, 
Elihu Thomson, Edwin J. Houston, Edward Weston, George 
Westinghouse, Frank J. Sprague and many others represented 
the engineering intellect which was devoted to the develop- 
ment of electrical industry in this country, headed especially 
by the work and invention of Thomas A. Edison, who is en- 
titled to the credit of devising the electrical distribution sys- 
tem as it is understood today. 

I have mentioned just a few names connected with en- 
gineering development; I might go on all evening in speaking of 
the personal work of various men; but time will not permit. 
There is just one other man, however, to whom it is fitting to 
refer Mr. Marconi, whose marvelous invention of the wire- 
less telegraph has practically annihilated space. 

WHAT TRANSPORTATION FACILITIES MEAN TO CIVILIZATION 

How have these great accomplishments of the world's 
inventors and engineers benefited civilization? Great systems 



394 ADDRESSES OF SAMUEL INSULL 

of transportation have been created ashore and great vessels 
afloat, connecting the several continents which border the great 
oceans of the globe. Surely an abridgment of distance, as 
Lord Macaulay put it, has been achieved by the work of these 
men. If "conveyance for man and goods from place to place" 
is one of the great elements in developing a people, surely the 
engineers who have contributed so much to the industrial de- 
velopment of the last century may be crowned as empire build- 
ers. The work of the great transportation agencies has made 
possible the great manufacturing establishments of Illinois, 
whose products far exceed the combined product of the agricul- 
tural and mining industries of the state. Their work has de- 
veloped the manufacturing industries of the East by trans- 
porting the raw materials of the West and of the South. They 
have doubled in value the producing territory of the Mississippi 
Valley by bringing its farmers, and later its manufacturers, 
into touch with the markets of the world. The inhabitant, 
whether he be a trader or whether he be following any other 
occupation today whether he lives in the Occident or the 
Orient is alike under everlasting obligation to the engineers 
who have developed the great transportation systems ashore 
and afloat. Take the mere question of the abridgment of 
distance. London is today nearer to Urbana than Detroit 
was seventy-five or a hundred years ago. Pekin is today 
within easier reach of Champaign than New York was a com- 
paratively short time back. 

If distance has been bridged by the transportation engineers; 
if with their assistance and the courage and valor of the pioneers 
the forests and prairies have been turned into great producing 
farm lands, surely the telegraph and the telephone have pro- 
duced an abridgment of time that would have seemed the im- 
possible hope of the dreamer a hundred years ago. The tele- 
graph and telephone, especially the telegraph, have made the 
world of nations next-door neighbors. The civilizing influence 
of contact, the impossibility of isolation, the knowledge of 
what is going on the world over and the change that such 
knowledge must produce in one's point of view, the effect of 



INFLUENCE OF ENGINEERING 395 

such knowledge on the development of our race, are all mat- 
ters that must be traced more or less to the work of the in- 
vestigator and the engineer in the invention and development 
of our great schemes of communication, either by telegraph or 
by telephone, local or international. 

CHEAP ELECTRICAL ENERGY FOR RURAL COMMUNITIES 

The development of the business of the generation and dis- 
tribution of electrical energy will probably have, within the next 
quarter of a century, very great influence on the development of 
our local communities, not alone the large cities but our rural 
communities throughout our states wherever there is any con- 
siderable density of population. Heretofore the business of 
producing and distributing electricity on an economical basis 
has been confined very largely to our large cities; but the mar- 
velous works of our engineers during the last two decades the 
great changes that have taken place in connection with the 
development of prime movers, the changes from the recipro- 
cating engine to the steam turbine, the changes in use of units 
of 30,000 horse-power in place of units of 5,000 horse-power 
are producing reductions in the cost of the energy which will 
lead to the centralization of production and distribution over 
wide areas in the interest of economy. This will be done 
in the interests of low cost to producer and low price to the 
consumer, and this centralization must have a very great 
effect in the development of the industrial interests of such states 
as Illinois. It is today not only a possibility but an actuality 
that the same advantages that we enjoy in large communities 
can also be enjoyed by the farmer, by the rural community, 
by people having large areas of land to drain and by others. 
The same privileges of low cost of energy can be obtained for 
them as are obtained for the users of energy in the large centers 
of population- 

If you will trace back the development of the large manufac- 
turing centers in this country, the early manufacturing centers, 
you will find that the workshop and the mill were established 



396 ADDRESSES OF SAMUEL INSULL 

where cheap power could be obtained. Until the last few years 
the only places where cheap power could be obtained were on 
streams where hydraulic development was possible. The 
great manufacturing establishments of New England owed 
their foundation largely to this cause. Suppose any very 
small community anywhere in the thickly populated territory 
of the Mississippi Valley is able to obtain energy for manufac- 
turing purposes at low cost. Assuming that in that community 
the manufacturer can obtain the necessary labor; then it 
stands to reason that one of the great troubles of modern life 
will be solved by cheap energy. 

SOCIOLOGICAL ASPECTS OF CHEAP ENERGY IN RURAL LIFE 

At the present time large manufacturing interests as a rule 
cluster around large centers of population. The reason for 
that is that power is relatively cheap where the manufacturers 
have a large population to draw on for labor. But as this state 
and other surrounding states become studded with manufac- 
turing establishments the necessity which compels the work- 
man to dwell in large centers of population, where living con- 
ditions are most unfavorable, will cease. He will be able to 
establish himself under conditions where he can get healthful 
environment for his family. Instead of living in overheated, 
ill-ventilated, small tenements of the big city he will have the 
opportunity to establish himself practically amid the desirable 
conditions that those living in the country ordinarily enjoy. 
Surely if this can be accomplished, if the living conditions of our 
people can be improved, if their children can be brought up 
under circumstances which will give them the foundation of 
good health, which will give them the opportunity of associa- 
tion in our country schools with that portion of the population 
the farming population which is the very backbone of the 
country, it is reasonable to expect greater satisfaction on the 
part of the workmen with their conditions and better relation- 
ship, because of a closer community of interests with employers, 
and, in general, a better chance for the workman and his family. 



INFLUENCE OF ENGINEERING 397 

MODERN METHODS MAKE A DEMAND FOR ENGINEERING 

BRAINS 

It is natural in coming to the University of Illinois that 
I should want to address myself to the students of the College 
of Engineering, and to speak to them somewhat of the oppor- 
tunities of their profession. The modern facilities for study 
that is, the engineering courses as now known, whether for 
civil, mechanical, mining or electrical engineering, and the 
study of chemistry to be employed in the industrial arts 
these facilities are most comprehensive and are a blessing to 
the youth of this great state. It often occurs to me to wonder 
whether the young men really appreciate the possibilities that 
are before them. It is not uncommon in this day, when big 
businesses and big combinations are receiving the attention of 
the politician and statesman, to decry the possibility of oppor- 
tunity for the young man; but as a matter of fact there never 
was a time when opportunities were so great. The greater 
the business the greater the demand for trained men and the 
greater the reward for capacity, and for executive ability and 
training in special knowledge and ability. When manufactur- 
ing businesses or the great public-service businesses of the 
country were run on a small scale the item of overhead ex- 
pense was one of the most serious that the manager had to 
deal with. From force of circumstances, the amount he could 
pay for trained brains was relatively small. But that condi- 
tion does not exist with the modern methods of business devel- 
opment of large industrial establishments. Development of 
large transportation systems, development of large businesses 
of every sort, call for so much special knowledge and special 
training that the young men of our engineering colleges have 
today an opportunity that their predecessors never had. 

THE EMPIRE BUILDERS OF THE FUTURE 

In addition to one's duty to one's self to provide for the 
future, to take care of one's own, the young man of the common- 



398 ADDRESSES OF SAMUEL INSULL 

wealth owes a duty to the state in which he lives and to the 
community in which he resides. It is not necessary for him 
to enter public life in order to perform that duty. In pri- 
vate service he can get the personal satisfaction of work well 
done and of receiving the remuneration for work well done. 
Furthermore, there are many problems that the business man 
and the engineer will have to solve in connection with the de- 
velopment of the great businesses and the great industries of 
this country during the next two or three decades. Many 
of you young men, I suppose, think that there are no such 
opportunities in the transportation world as gave the chance 
for a James J. Hill or for an E. H. Harriman, but as the great 
transportation systems of this country develop there will be 
just as great an opportunity for the industrial empire-builders 
as there was for the grand old empire-builder who has done so 
much in connection with the development of the Northwest, 
or as there was for that other great builder, now dead, who did 
so much in connection with transcontinental travel and the 
development of the Pacific Coast. 

I have about spoken my allotted time. If there is one word 
more that I may add, let me again appeal to the young men of 
this institution. There is no royal road to success. Achieve- 
ment is only possible by very hard work. Whether your career 
is to be made as an engineer or as an agriculturalist or as a 
doctor or along chemical lines, the only way that you can get 
to the top is by the most strenuous labor; by forgetting the 
hours of the day and practically the days of the week. Con- 
stant hard work has brought success to many in the past, and 
there is no reason why the same task of constant and hard work 
should not bring success to all you young men and women who 
are attending this university. 



POSSIBILITIES OF UNIFIED ELECTRICITY 
SUPPLY IN THE STATE OF ILLINOIS 1 

NOT SO very long ago if one visited any one of the 
principal cities of this country, and even many of the 
smaller cities of this country, he would find not one, 
but two, three, sometimes four, companies engaged in the elec- 
tric-light-and-power business, competing with one another, 
on the mistaken theory on the part of those communities that 
by allowing competition, they were furnishing themselves 
with cheap energy. That method of doing business has very 
largely disappeared. There is little or no competition in the 
large cities in the business of the production and distribution 
of electrical energy. 

Competition has been replaced by regulation. The com- 
munities have gradually learned, in many cases to their cost, 
that the paralleling of investments in the shape of generating 
stations and distribution systems simply added to the cost of 
the product which the community desired to purchase, and 
they have consequently come to the conclusion that a regulated 
monopoly, whether such monopoly be privately operated or 
publicly operated, is more in accordance with scientific methods 
than regulation by competition. 

While the communities in which we operate have been 
learning something, we also have been learning something. 
It is but comparatively a few years ago that a company, even 
if it enjoyed the monopoly of business in the city in which it 

1. Mr. Insull gave an illustrated talk in Chicago on May 15, 1913, before 
the Commonwealth Edison Company Section of the National Electric Light 
Association. He repeated, for the benefit of his own people, much of the ma- 
terial presented in the Franklin Institute lecture on "The Production and Dis- 
tribution of Energy," given in Philadelphia in the preceding March. Some 
new points, or new ways of elucidating old principles, were brought out, how- 
ever, and these are given in the present chapter. 

399 



400 ADDRESSES OF SAMUEL INSULL 

operated, was in the habit, partly from lack of experience, 
partly from lack of apparatus, of establishing a series of central 
stations, none of which had any connection with any of the 
others. In fact, I well remember it cannot be more than 
fifteen years ago that one of the most distinguished engineers 
on the other side of the ocean stated that the only way to design 
an economical generating station and distribution system was 
to feed an area having a radius of from a quarter to a half a 
mile. 

LEARNING ECONOMICS BY EXPERIENCE 

Gradually as we obtained experience, as we profited by 
some of the experiments we tried, say ten to fifteen years ago, 
we came to the conclusion that the economical way to produce 
and distribute energy was to mass its production at a given 
point, convey energy by means of high-tension transmission 
lines to whatever subcenters of distribution we thought de- 
sirable, and then to distribute at possibly a lower pressure 
from those substations. We did not know, at the time that 
we started to do that kind of thing, much about diversity. 
We had learned something about load factors, but we had 
hardly dreamed of the savings to be gained by massing diver- 
sified uses or diversified territories, and we were practically 
stumbling along in the dark, but we found we got a little 
better results by the changed methods that we were pursuing. 

In more recent years we have been inquiring into the 
economics of the situation. We have been trying to discover 
the economic laws governing our business. We have been 
trying to solve the question as to why we were able to obtain 
this or that result by pursuing this or that policy. 

Most of the real information that we have on that subject 
has come to us within the last decade. First of all, as I have 
said, we massed production in large cities. Later on we tried 
it in suburban communities. Some people imagined we did 
this simply to get large amounts of turn-over, irrespective of 
the conditions under which that turn-over was produced. 
Others have imagined that we have done it so as to be able to 



POSSIBILITIES IN ILLINOIS 401 

make the profits that follow financial transactions in the way 
of promotion. But the fact is that if the policies that have 
been pursued by the men engaged in operating this industry, 
whether in the large cities, in the smaller places, or in rural 
communities, had not been based on sound economic prin- 
ciples, they would have been bound to fail. 

ESTIMATED ELECTRICAL REQUIREMENTS OF THE STATE OF 

ILLINOIS 

It is estimated that if everything in Illinois requiring the 
application of mechanical energy were run electrically, about 
1,350,000 kilowatts would be needed. The load factor would 
probably be about 53 per cent. The kilowatt-hours would 
amount to 6,336,355,000. The total estimated requirement for 
steam railroads is almost as much as the total requirements for 
all other purposes. According to the reports of the State 
Railway and Warehouse Commission, the coal consumption 
at the present time by the steam railroads of the state of Illinois 
is 1 1 ,620,000 tons. If the transportation business were operated 
electrically, assuming the coal consumption was three pounds 
per kilowatt-hour, there would be a saving of 7,500,000 tons 
of coal, or about 15 per cent of the total coal production of the 
state of Illinois. I do not know of any greater example of 
possible conservation of the resources of this great state than 
the gradual electrification of the steam railroads of the state. 

WHAT THE LONDON TIMES SAID 

It is sometimes pleasant to learn what people say about 
you when you are, so to speak, away from home and yet at 
home. In a London hotel on Wednesday morning, January 22, 
I was sitting reading a copy of the London Times containing 
an engineering review for the year 1912, when I came across 
this paragraph in reference to electrical development: "There 
was a pleasing note of optimism in the news that the Common- 
wealth Edison Company, of Chicago, which is probably the 



402 ADDRESSES OF SAMUEL INSULL 

most important electric-supply authority in the world, had 
placed an order with an English firm for a 25,000-kilowatt 
turbine-generator the greatest power ever contemplated for 
a single shaft for any turbine or engine on shore or afloat." I 
took that as a great compliment for us all. 

SOCIOLOGICAL ASPECTS OF CENTRALIZED ENERGY 

It is probably not too bold a prediction to say that, within 
a relatively few years, the entire eastern part of the United 
States will be covered by a network of electrical transmission 
and distribution lines. Situated in that area at points where 
the greatest economy of production can be achieved will be 
large generating stations. The extent of territory that they 
serve will depend naturally upon the density of population of 
the immediate surrounding territory and the relation of cost 
of energy to interest charges on transmission lines, governed 
largely by the distance from the source of fuel, namely, coal, 
or the distance from hydro-electric plants, of which large 
numbers will undoubtedly be erected and prove economical 
when operated in connection with large distribution systems, 
with steam plants as reserves. 

I myself am inclined to think, and I said this the last time 
I was addressing myself to this subject, that a great many of 
the problems of living, of labor, the bringing up of children 
under conditions where they can get the greatest chance to 
live and be educated and be surrounded with the proper en- 
vironment I think that those problems can be very largely 
solved by a wise system of production and distribution of energy 
extending over the rural communities in which we live, or rather 
which surround us. 

BEARING ON THE ELECTRIFICATION OF RAILROADS 

I believe that the problem of the electrification of our steam 
railroads is going to find its solution when the density of travel 
is great enough to justify it in connection with this same mass- 



POSSIBILITIES IN ILLINOIS 403 

ing of production. If at the same time energy is produced for 
the use of the small manufacturer, for the use of the mine owner, 
for the use of the rural community, for the use of the farmer; 
if at the same time energy is produced not only for the use of the 
interurban railroad but for the use of the great trunk-line sys- 
tems of the country, the combined result will be such a low 
cost of production of energy as to make it desirable for a 
manufacturer to settle in any rural community where the 
quantity of labor justifies his building his factory. 

I believe that at the same time many of the problems in 
connection with the enormous increase in expenses in the op- 
eration of our great systems of transportation will disappear. 
One of the most expensive things today in connection with 
operating a great railroad is the cost of handling freight at 
terminals where land is worth $40 a square foot. The cost of 
transporting freight through cities like Chicago, Cincinnati, 
St. Louis and the other important cities of the Central West 
is very high. One of the principal steam-railroad men in this 
community told me not later than this afternoon that it is a 
very common thing for a steam railroad to haul freight 500 
miles for nothing, because all the money that the company 
received for hauling it was consumed in handling the freight and 
carrying it out of the city of Chicago. 

WHAT CHEAP ENERGY MEANS 

If anywhere along the lines of steam railroads the man- 
ufacturer can establish his factory, what better solution can 
you find for the handling of the freight problem? I have only 
to draw the attention of those who have traveled much on the 
Lake Shore Railroad to the enormous change in conditions 
that has occurred between South Bend and Elkhart, in In- 
diana, since the development of the water-powers on the St. 
Joseph River. It is a continuous city, almost, from South 
Bend along the railroad to Elkhart, whereas a few years ago 
it was nothing but farms. That is the result of cheap power. 

Those of you who are familiar with the busy centers of 



404 ADDRESSES OF SAMUEL INSULL 

manufacturing in Connecticut, Rhode Island and Massachusetts 
realize the fact that it is cheap power that originally produced 
the concentration of manufacturing in that territory and that 
built up those great eastern enterprises. 

If you go farther northwest and take the great flour-milling 
business established on the Mississippi River at St. Paul and 
Minneapolis, what do you find was the cause of the original 
establishment there of the mills? First, the material, the 
wheat of the Northwest, was close at hand, and, second, the 
cheap power of the waterfalls. 

I think I am justified in saying that if you will allow the 
cost of distribution I speak not only of the operating cost, 
but of the investment cost of distribution the difference of 
cost of energy between that from a steam station and that from 
a hydro-electric station is of little or no consequence as long as 
we can get coal as cheap as we can get it here in this state of 
Illinois. I see no reason whatever, if the figures that I have 
presented to you tonight are correct (and my experience of 
the last ten years gives me absolute confidence in those figures 
as the basis for the financial operations that I have made in 
the last few years), why we should not carry cheap energy to 
the door of every home in this state of Illinois. 



BROAD QUESTIONS OF PUBLIC POLICY 1 

THIS report is signed by Messrs. N. F. Brady, president 
of the New York Edison Company; Everett W. Burdett, 
general counsel of the Edison Electric Illuminating 
Company of Boston; H. M. Byllesby, head of the firm of 
H. M. Byllesby & Co.; Henry L. Doherty, head of the firm of 
Henry L. Doherty & Co.; Charles L. Edgar, president of the 
Edison Electric Illuminating Company of Boston; W. W. 
Freeman, ex-vice-president of the Edison Electric Illuminating 
Company of Brooklyn and at the present time connected with 
the Alabama Power Company; George H. Harries, president of 
the Louisville Gas and Electric Company; Joseph B. McCall, 
president of the Philadelphia Electric Company; Thomas E. 
Murray, vice-president of the New York Edison Company; 
Samuel Scovil, vice-president of the Cleveland Electric Il- 
luminating Company; Charles A. Stone, head of the firm of 
Stone & Webster; Frank M. Tait, of the Dayton (Ohio) Power 
& Light Company; Arthur Williams, of the New York Edison 
Company, and myself. 2 

One of the reasons for making a practice of reading the re- 
port of our public policy committee at an open session during 
the time of the annual convention of the association is to 
acquaint our friends not directly connected with the great 

1. As stated in the text, Mr. Insull has, for a number of years, presented 
the report of the public policy committee at the annual conventions of the 
National Electric Light Association. Usually the report is read at an evening 
session that is perhaps the culmination of the convention for dignity and 
impressiveness. Two of Mr. Insull's speeches on these occasions are given 
in this collection. The one herewith was delivered on June 4, 1913, at the 
Chicago convention. The other ("The Final Test of Welfare Work," page 
193) was delivered at the New York convention of 1911. 

2. A few of the gentlemen named occupy different positions now (1915) 
than at the date of this report. 

405 



406 ADDRESSES OF SAMUEL INSULL 

industry with which most of you in this room are associated 
with the general trend of our policy on all public matters. It 
has been my privilege for a number of years to present this 
report, and to make some comments on it and to refer to some 
of the problems connected with our industry. The last occa- 
sion was a year ago, on the Pacific Slope, at the Seattle conven- 
tion; and I then drew attention to the fact that the public 
policy committee of the association is composed of men who 
represent the larger financial interests connected with the 
electric-light-and-power industry. 

RESPONSIBILITIES OP MANAGERS OF UTILITY PROPERTIES 

Our president, 1 in his opening speech, stated that the 
probable cash investment in our business in this country 
amounts to about $2,500,000,000, and I presume that it is still 
fair to repeat the statement made by me at the Seattle conven- 
tion of 1912 that the gentlemen who signed the report which I 
have just read to you represent and carry on their shoulders 
the responsibility that goes with upwards of one-half of that 
investment. So it is right to assume that men in that position, 
men who are responsible for from $1,000,000,000 to $1,250,- 
000,000 of invested capital must feel the serious responsibilities 
that devolve upon them when they are considering the character 
of the report they shall put out, which, as I have stated, is 
practically the declaration of the association as to its policy 
on public affairs. I would especially draw your attention to the 
fact that the greater part of their report deals with such ques- 
tions as employees' welfare, the minimum wage, safety and 
sanitation, and accident compensation. 

In these latter days corporation managers, men who are 
responsible for hundreds of millions of dollars, are seldom given 
credit by the statesmen and politicians discussing corporate 
matters for taking any interest in the welfare of their employees, 
in the question as to whether these employees should receive 

1. The president of the National Electric Light Association at that time 
was Mr. Frank M. Tait, of Dayton, Ohio. 



PUBLIC POLICY 407 

a living wage, or in questions connected with the safety and 
sanitation of their establishments. And yet there is an enor- 
mous expenditure along these same lines going on from year to 
year, not only in the industry with which we are connected, 
but in other manufacturing industries. Take, for instance, 
the steel industry. In the year 1911 the United States Steel 
Corporation spent upwards of $2,000,000 in safety work and 
sanitation. It has about 200,000 employees, and therefore 
during the year it spent about $10 for each employee in looking 
after the health and general welfare of the men. The stock- 
holders of the company got no dividends from these expen- 
ditures any more than our stockholders get dividends from such 
expenditures. The only dividends are physical, mental and 
moral health very valuable assets in any community and in 
any country. 

This great industry of ours, producing electrical energy, 
probably employs upwards of 200,000 men in the United 
States; and I do not think that an estimate of $2,000,000 a 
year spent on a similar class of work by ourselves at all over- 
shoots the mark. 

GOVERNMENT OWNERSHIP AND CONSERVATION OF RESOURCES 

Some reference was made in the report to the question of 
municipal ownership. Most of you in this room have heard 
that subject discussed pro and con, again and again. The 
result of municipal ownership is usually, I would say almost 
universally, a waste of the taxpayers* money; so that apart 
from the interest we have in the subject, being engaged in a 
business subject to regulation and therefore subject to protec- 
tion, we are all of us very largely interested in it from the 
point of view of the taxpayer. The public-service companies 
of almost every community have paid their fair share of the 
taxes. I am glad to say that there are very few of them who do 
not pay their fair share of the taxes; hence the public-service 
companies are very vitally interested in this question as tax- 
payers. 

Fortunately, the wave that went over the country some 



408 ADDRESSES OF SAMUEL INSULL 

twenty years ago in connection with municipal ownership has 
spent itself; and if we will simply take the experience obtained 
during this interval in the operation of utilities of the character 
that we represent; if we simply take the experience of the vari- 
ous communities, the various municipal corporations, that have 
undertaken to operate these utilities, we can supply ourselves 
with all the figures and arguments necessary to demonstrate 
that the operation by a municipality of a public utility is not a 
necessary function of government, nor a part of the function of 
government. 

When we met a year ago at Seattle, we heard a great deal 
about the subject of hydro-electric development on the Pacific 
Coast and on both sides of the Rocky Mountains, and we were 
given the point of view of our friends in the Pacific States as to 
the course now pursued by the Federal government with relation 
to the water-powers in the Forest Reserves. I think it was 
illuminating, the point of view that we reached there. We 
learned that there are large tracts in some of the great states 
bordering on the Pacific the development of which is absolutely 
stopped owing to the policy, or rather lack of business policy, 
on the part of the Federal government. Little or nothing has 
been done in the last year. Practically no advance has been 
made in the direction of getting a statement of policy from the 
Federal government something that would initiate the de- 
velopment of the vast water-powers under government control 
on a basis that would give a fair return to capital invested. 
This subject, while not of very material consequence to those 
of us who live in the Mississippi Valley or in the states border- 
ing on the Atlantic seaboard, is of vast consequence to those of 
our number who come from the two sides of the Rocky Moun- 
tains, and is one to which the public policy committee and the 
hydro-electric committee of the association should give most 
vigorous and close attention in the near future. 

THE POLICY or REGULATION 

One of what may be called the trends of the times is in the 
direction of a closer regulation of our business by state com- 



PUBLIC POLICY 409 

missions. Our business has always been regulated, either 
locally or else by the state, unless the state or municipality 
has chosen to neglect this power. There is one great advantage 
that must necessarily follow regulation, and that advantage is 
protection. Some of us are regulated by municipal authority, 
by boards of aldermen; and the only direction their regulation 
takes is regulation downward in price. Others work under 
state commissions that have given, some of them very satis- 
factory, others very unsatisfactory decisions; but take it al- 
together, by and large, the general tendency of state commis- 
sions has been satisfactory. As they have grown familiar with 
our business and have become educated in its requirements, 
their treatment of us has become more liberal. Speaking 
both personally and I think on behalf of practically all the 
members of the public policy committee, I would urge upon the 
members of this association to do whatever they can to bring 
about fair commission laws in the states in which they operate. 
I first began to address myself to this subject when I was 
president of the association, now some fifteen years ago. At 
that time 1 I asserted that regulation must be followed by pro- 
tection, and that regulation and protection naturally lead to 
monopoly. Ours is a business, as I will point out to you later, 
which can be run successfully only as a monopoly successful, 
I mean, alike to the security holders and to the public. If we 
are to run our business permanently as a monopoly, the truly 
economic condition under which we should operate, we must 
be willing to have imposed upon us a fair amount of regulation, 
and that fair amount of regulation must necessarily be fol- 
lowed by a fair amount of protection. If we get the protection 
to which we are entitled, and which we must finally get as 
these commissions become educated in the intricacies of our 
business, the value of our securities will be greatly enhanced, 
the price that we must pay for money, which, after all, is the 
greatest item of expense with us, will be materially lowered; 

1. Mr. Insull's presidential address to the National Electric Light Asso- 
ciation in 1898 is printed in the present collection under the title "Standardi- 
zation, Cost System of Rates, and Public Control," page 34 et seq. 



410 ADDRESSES OF SAMUEL INSULL 

and we shall be able, on account of an absence of raiding, on 
account of cheaper money, to make a fair return to our investors 
and at the same time give fair and reasonably low rates to our 
customers. 

THE DEVELOPMENT OF ELECTRIC SERVICE IN AND 
NEAR CHICAGO 

Some of my friends have thought it might interest you if 
I refer somewhat to our business as we conduct it in this neigh- 
borhood. It is a very great pleasure to me to receive the mem- 
bers of this association in my home town. You will pardon 
the egotism if I say that I know there is a great deal to be 
seen here, in connection with the business of producing and 
distributing electrical energy, that should interest you, and 
from which most of you can draw profitable lessons. I do not 
mean to say that I can not get equally profitable lessons by 
visiting the communities in which you all operate; but here, 
in the city of Chicago, we have had the opportunity, partly 
from peculiar local conditions, partly from the characteristics 
of our people, but mainly from the courage of my financial 
associates, who have treated me so kindly over a period of 
twenty years we have had the opportunity of solving, to a 
large extent, the question of the economical production and 
distribution of energy. 

When I came to Chicago in 1892 the average size of our units 
of production was about 200 horse-power. At the present time 
the average size is nearer 20,000 horse-power, and within the 
next two years this size will be increased, so that our largest 
units will be 45,000 horse-power. We have been able to 
produce the conditions that justify the use of such large units 
of energy by a system of selling our product at the lowest 
possible price to the customer who uses it the greatest number of 
hours in the year. It is purely a question of averaging the in- 
terest account over the greatest number of hours, and con- 
sequently making interest charges the lowest possible sum per 
hour. That is all that is involved in the economical production 
and distribution of energy. 



PUBLIC POLICY 411 

At the present time we have a rating of 425,000 horse- 
power. Last winter we had a load of 350,000 horse-power. 
We have machinery on order of 112,500 horse-power, so that 
by the time that machinery is installed our plant rating will 
be 637,500 horse-power. We are actually, at the present time, 
putting up, or else just getting ready to let contracts for, 
buildings that will house an additional rating of 285,000 
horse-power, so that our present engineering scheme for the 
use of energy in a community of only about 2,500,000 people 
contemplates somewhere about 850,000 horse-power. 

I think if your convention stays away from Chicago as long 
as it did this last time, that the chances are when you return we 
shall be up toward a million horse-power, or possibly started on 
the second million. We put out 800,000,000 kilowatt-hours in 
the year 1912. That is an amount of energy equal to the 
central-station production of any four cities of the United 
States outside of Chicago. I will not name any other cities; 
I would not want to embarrass my friends or embarrass myself 
in mentioning them. We burned 1,103,230 tons of coal last 
year. If the efficiency of our apparatus had been on the basis 
of the year 1902, just ten years previous, our coal consumption 
would have been 2,650,000 tons; so that I think we are prob- 
ably among the biggest factors in the state of Illinois in con- 
nection with the conservation of the natural resources of the 
state. We sell our energy at an average price of a little over 
two cents a kilowatt-hour, and we produce it at an average 
price of a little over a cent, not figuring interest and deprecia- 
tion. 

THE MASSING OF PRODUCTION 

These figures are mentioned with no idea of suggesting that 
all of our members can accomplish the same thing. All have 
not the same conditions. Vested interests have grown up, 
dealing with the production of energy in various communities, 
which it is difficult to dislodge. They are all of them in the 
larger cities doing a business so great that they do not need the 
encouragement that would come from knowing what we have 



412 ADDRESSES OF SAMUEL INSULL 

accomplished. I mention these figures for the advantage of 
our members who come from the smaller communities through- 
out the country. I refer especially to the communities in the 
more thickly settled portions of the country; to any portion of 
the United States between the center of the Mississippi Valley 
and the Atlantic seaboard, or to that portion of the Pacific 
Coast which is most densely populated and where the pur- 
chasing powers of the people is great because of the marvelous 
productiveness of their soil. I mention these figures for their 
encouragement. Relatively, they can attain the same results 
that we have done. 

It is not necessary it is an economic blunder to have 
a generating station in every small community, irrespective of 
what other small communities are adjacent to it. The presi- 
dent of this association referred in his opening address to the 
tendency to change of ownership among the electric-light-and- 
power properties of the country, especially those in the smaller 
communities. Where that change of ownership, or the massing 
of ownership, has taken place among isolated properties, 
there is little advantage to be gained, except from centralized 
financing; but where that massing of energy takes place in a 
number of communities more or less close to one another, so 
that they can be joined up by a system of high-tension distribu- 
tion, those combinations are following true economic laws, and 
if properly financed are bound to succeed. I know of no better 
way to fight municipal ownership or municipal operation in the 
small communities of the Central West than by adopting a 
system of centralization of production and distribution. It 
means low cost of the energy at the prime source of supply. 
It means the economical distribution of that energy over the 
territory served. It opens up possibilities of expansion in 
business to such an extent that if I gave expression to my real 
views on the subject I would be looked upon as a dreamer. 

I often wish that I could see fifty years ahead, and be able 
to realize and enjoy the situation that will develop in connection 
with the great industry with which most of us are concerned. 
I should expect to see a vast distribution system stretching from 






PUBLIC POLICY 413 

one end of the country to the other, wherever density of popu- 
lation justified it; to see electrical energy used for all classes of 
power, where power was required at all. By that time power 
will certainly be produced from a common source. There will 
be the closest co-operation between the man who produces his 
power from steam and the man who produces his power direct 
from water, a co-operation that will lead to a cost of energy so 
low as to place it within the reach of all, and make it possible 
to develop at almost any place almost any class of industry 
wherever transportation is provided and it is possible to get the 
operatives necessary for the manufacture. 






PRESENT AND FUTURE DISTRIBUTION OF 
ELECTRICAL ENERGY 1 

IT IS a very great pleasure to me to be present at a meeting 
of this character, in this location, arranged mainly by the 
people interested in the incandescent-lamp business. Unless 
my friend Mr. E. W. Rice antedates me in the lamp business, 
I think I am the oldest lamp manufacturer in point of years on 
this island today. I think the first manufacturing cost sheet 
that I ever got out on the cost of lamps was for the month of 
March, 1881, thirty-two years ago. The cost of the lamps the 
first month, as I remember it, was about $1.50 to $1.75 apiece, 
and we were selling them for 35 cents apiece. It was not a very 
good commercial proposition at that time. 

If my memory serves me rightly if Mr. Morrison had 
been here he would have been able to assure me of the fact I 
think that the first specimen of electrical transmission that I 
ever saw was the transmission line running from the old machine 
shop at Menlo Park, N. J., upon the hill, to a point about half 
a mile (maybe not as much as that, probably a quarter of a 
mile) east of the present Menlo Park station on the Pennsyl- 
vania Railroad. The building where the motor was installed 
was burned down some years ago. It housed the first commer- 
cial incandescent-lamp factory in this or any other country. 
I am inclined to think that a portion of the operations were 
effected by the utilization of a bipolar motor constructed on 
the lines of the old Edison design of bipolar dynamos, neces- 

1. An address delivered on September 4, 1913, during the "Co-operation 
Conference" on Association Island (in Lake Ontario), N. Y. This island 
takes its name from, and is the summer rendezvous of, the National Electric 
Lamp Association. A number of electrical and business men of prominence 
were invited to attend the "Co-operation Conference" to discuss effective 
co-operation not only between the various branches of the electrical industry, 
but between producer and consumer as well. 

414 



DISTRIBUTION OF ENERGY 415 

sarily a direct-current machine at that time, the source of 
power being, as I have stated, in the machine shop on the hill. 
That is my impression; I know the motor ran there, and I 
know that a very few years ago that same motor was in use 
at the Harrison (N. J.) factory of the General Electric 
Company. 

ELECTRIC LIGHTING TO BECOME AS A BY-PRODUCT OF THE 
ELECTRIC-SERVICE BUSINESS 

I have been asked to speak to you on the question of the 
transmission of energy, which is an important subject, not 
alone to us but to everybody else in this great country. It 
is a serious question whether the economical production and 
transmission of energy is not a more important matter than 
the economical administration of the transportation systems 
of the country. If you will go back but relatively a few years 
and seek for the foundation of a number of the great manufac- 
turing industries that are situated to the southward and to the 
eastward of us, you will find that long before there was any great 
unified system of transportation existing in this country the 
manufacturing interests represented today by enormous estab- 
lishments were at that time situated very largely where they are 
today. Of necessity they were much smaller. They were 
usually situated on some New England stream where power 
could be developed cheaply. You see the remnants of those 
small water-powers even to this day. Some that have been 
abandoned by the manufacturers have been taken up in this 
generation by manufacturers of a different class of product, 
kilowatt-hours, and as you go along the marvelous roads of 
Vermont and New Hampshire and view the scenery in what 
may well be called the playground of America, you will often 
come across a small water-wheel with a single generator at- 
tached. If you will follow the leads running off from that 
machine you will find lines extending in every direction. Prob- 
ably that water-power is the source of energy for ten, fifteen, 
twenty or thirty miles of transmission lines. 



416 ADDRESSES OF SAMUEL INSULL 

The business of the production of electrical energy started 
from the other end, not from a cheap source of power, but really 
from a very expensive source of power. Some thirty years ago 
the illustrious inventor whose name should be on every incan- 
descent lamp produced in the world, simply in honor of the 
man who is entitled to the credit of founding the great industry 
with which we are connected (I refer to Mr. Edison) installed 
the first generating station and distribution system in the 
lower part of New York city. At that time the business of 
producing and distributing electrical energy was mainly for 
the purpose of producing light through the use of the incandes- 
cent lamp. The business of supply energy for motors was, so 
to speak, a by-product, just as much a by-product of the elec- 
tric-lighting business of that day as coke and tar and ammonia 
are by-products of the gas business today. Notwithstanding 
the fact that the incandescent-lamp business has grown so that 
100,000,000 lamps are consumed in this country in a year, the 
electric-lighting end of our business is destined to become, 
very largely, a by-product. That side of our business thirty, 
twenty, even ten, years ago was our main stand-by; it was the 
portion of our business from which we got the necessary income 
in order to pay a return to those investing their capital in our 
business. Although of such great importance as late as ten 
years ago, today, in looking to the future, I think that it is 
perfectly safe to say that the lighting end of the business will 
be the by-product side of the business, and I think the main 
income for a return on our investment will come from the power 
business. 

INEVITABLE THAT ALL ENERGY REQUIREMENTS OF A GIVEN 
AREA SHOULD BE SUPPLIED BY ONE ORGANIZATION 

A few figures will show you what I have in mind. At the 
present time, in any real large central-station system where 
the entire energy requirements of the community outside of the 
isolated plants are supplied from one source and that is the 
only economic way of supplying energy, as I shall endeavor to 



DISTRIBUTION OF ENERGY 417 

show later on the amount of energy used for incandescent 
lighting, as far as we are able to check it, is not more than 27 
per cent of the total requirements under the best conditions. 
This figure may become 45 per cent of the total under con- 
ditions not so good. 

The money figures are somewhat different. It is very 
difficult to get down to exact figures on the lighting side of the 
business, for the reason that many motor devices and miscel- 
laneous appliances are on our lighting circuits, and the energy 
used by those devices is metered as electric lighting. There- 
fore, when the consumers' bills are rendered, they are rendered 
as lighting bills. But take the principal property that I my- 
self have charge of the Commonwealth Edison Company 
of Chicago its income from lighting today, although it has 
more customers than any central-station company in the world, 1 
is only 47 per cent of its total revenue. Its output for lighting 
is 25 per cent of its total output. 

You will understand, therefore, why I take the position 
that our business is decidedly a power business rather than a 
lighting business, and that our function is to produce the energy 
that is required in a given territory, whether that energy is 
used for purposes of lighting, for purposes of stationary power, 
for industrial purposes, or for purposes of transportation. Just 
as inevitably as the sun rises and sets, so, to my mind, it is 
inevitable that eventually the production of energy for any 
given community or any given territory, whichever may be 
found to be the economic basis to operate on the control of 
that production and the control of the distribution must be 
in the hands of one organization. If it cannot be done any 
other way if that result cannot be obtained through the 
medium of private capital I feel so strongly as to what 
must finally take place, that in my judgment it will become 
a public function. It rests largely with the people in this 
room as to whether it shall be done by private capital in 
this country, or whether it shall be done as a governmental 
operation. 

1. See note to next chapter, "Electrical Securities," on page 437. 



418 ADDRESSES OF SAMUEL INSULL 

Low LOAD FACTOR MAKES LIGHTING BUSINESS ALONE 
UNDESIRABLE 

If I were addressing an audience of laymen, I would prob- 
ably trace the various conditions that had led up to this situa- 
tion; but most of you people in this room are closely identified 
with one side or the other of the electric-light-and-power in- 
dustry, either the manufacturing side of the business or the 
operating side; and if you will think but for a moment, you 
must agree with me that the development of the apparatus 
of largely the last ten years has led up to the situation such as 
I have described to you. It is the development of the rotary 
converter its perfection as a piece of apparatus and the 
development of the turbo-generator those two things above 
everything else. To these might be added the improvements 
in construction and efficiency of static transformers. These 
three elements have led to the building of very large generating 
stations and the development of great distribution systems to 
carry away the energy produced at these stations. 

It is only a few years ago, but a very few years ago, as time 
is measured, even in a man's lifetime, that the Chicago Edison 
Company spent a large sum of money in building a generating 
station on the South Branch of the Chicago River, at the bridge 
at West Harrison Street, known to most of you as the Harrison 
Street station. That station served its purpose, produced 
energy supposedly about as cheap as it could be produced at 
that time. Today that station is so little a factor in our busi- 
ness that I am free to say that I do not know whether it operates 
one month in the year or six months, and I think some years 
it does not operate at all. There is a property that cost be- 
tween $1,500,000 and $2,000,000 and which has a little less 
than half the output rating of the last turbo-generator unit 
that we ordered for one of our modern stations. That about 
tells the story of the generating side of the business. 

The ability to mass enormous production and to do it at 
an economy of cost, so far as investment and operating are con- 
cerned, with the permanency of building and installation which 



DISTRIBUTION OF ENERGY 419 

it is impossible to attain with smaller enterprises, has brought 
us to a position where, anywhere this side of the Missouri 
River, where coal is reasonably cheap, energy can be produced 
at such low cost (it is not necessary to go into the figures 
here) that we are enabled to build an expensive distribution 
system and sell that energy at low cost not only in very large 
centers of population, but in the smaller towns and villages 
wherever the density of population justifies the expenditure 
on the distribution system. 

What has led us to desert the electric-lighting business, so 
to speak, and go farther afield and turn our companies into 
power companies, energy-producing companies, offering to 
sell their energy for whatever uses the user may desire to put 
it to? Fundamentally it is the low load factor of the lighting 
business. The load factor of lighting of any city in this latitude 
is on the average about the poorest business that it is possible 
for an electric-light company to have. I would not have dared 
to make that statement ten or twelve years ago, even if I had 
known it. I don't think I did know it at that time; I was 
trying to persuade myself then that the lighting load was very 
good business to have. Today I believe in taking it because 
it is one of the obligations that we have incurred, and that, 
when taken in connection with other lines of business, can be 
made profitable. But, take it by itself, it is as poor a branch 
of business as any we take on our system. 

COMPARATIVE FIGURES OF CHICAGO ELECTRIC SERVICE AND 
THREE HUNDRED BRITISH STATIONS 

I think that is probably well illustrated by making a com- 
parison between the figures of upwards of three hundred of the 
electric-supply companies in Great Britain and the figures of 
the Commonwealth Edison Company. We took the actual 
population of Chicago as 2,250,283 in 1912, or, to express it in 
round figures, we call it from two millions and a quarter to two 
millions and a half, and we compared that with the population 
of Great Britain in 1911 and 1912, of about 24,250,000. We 



420 ADDRESSES OF SAMUEL INSULL 

compared the Commonwealth Edison Company's business, 
in these figures that I am going to give you, with the combined 
business of 303 British electricity-supply undertakings. Their 
plant rating is 961,000 kilowatts; our plant rating at the same 
time was 264,000 kilowatts. Their output was 1,128,000,000 
kilowatt-hours; our output was 712,000,000 kilowatt-hours. 
Their income was a little over $40,000,000, ours a little over 
$15,000,000. Their investment was $310,000,000; ours was 
$68,000,000. With approximately one and a half times our 
output, their investment was pretty nearly five times ours. 
Their business is largely lighting business; our business is a 
general business, but mainly power business. Now take the 
investment per capita as a test. They have an investment per 
capita of $12.78; we have an investment per capita of $31.24. 
But their kilowatt-hours sold per capita are 46.5 and our kilo- 
watthours sold per capita are 326. In other words, we sell 
seven times more kilowatt-hours per capita than they do. 
Their income is $1.67 per capita and our income is $7.03. We 
have more than four times as much income per capita as they 
have. Their price, incidentally, is about 70 to 80 per cent higher 
than ours, notwithstanding the fact that we have expensive 
labor and they have cheap labor. They necessarily have cheap- 
er money than we have, and, I think, lower taxes. 

Now, these figures illustrate, no doubt, the difference be- 
tween a general electric-service business and a mere electric- 
lighting business. I have not any very good information on 
their load factor, because they figure load factors rather differ- 
ently from what we do. They figure load factor on the ratio 
of the average kilowatts sold to the maximum kilowatt capacity 
of their plants, and their load factor shows about 20 per cent. 
Our load factor shows 35 per cent on their basis of figuring. 
On the American basis I presume their load factor would show 
about 25 to 26 per cent and our load factor w^ould show about 
42 to 45 per cent. That I think about explains the story; that 
gives you about the difference between an operating company 
run for lighting purposes and an operating company run to 
supply energy for every purpose. 



DISTRIBUTION OF ENERGY 421 

ENGINEERS' PREJUDICE A SERIOUS OBSTACLE 

Let us consider what combination of production and dis- 
tribution means. Take the average large company in this 
country. I mention especially the large companies, for the 
small companies have made greater advances in the direction 
of concentration of production and distribution than the 
large companies. If the average large company does just an 
ordinary lighting and an ordinary retail power business, its 
load factor is about 30 per cent. If it does a general business, 
quoting such rates as will give it a very large output of energy 
for manufacturing purposes, for transportation purposes, and 
for lighting purposes, its load factor will run about 45 per cent. 
In other words, the investment of the company will average to 
be in use 50 per cent more time than that of the company which 
runs its business on the basis of dealing in ordinary retail light 
and power. Increased load factor means a relative decrease 
in interest charge and almost a relative decrease in depreciation 
charge. The labor items are not of such serious consequence, 
although it would mean a partially relative decrease in labor 
charge, as labor is not in proportion to load factor. 

What are the obstacles to producing a general system of 
generation and distribution which such figures would seem to 
indicate as desirable? The most serious obstacle, I think, is 
the question of the engineer. One gentleman explained it to 
me this morning as the engineer's caution. I told him I thought 
it was the engineer's prejudice. I think that is the most 
serious obstacle we have to deal with. To a lesser degree, 
and dealing with the lower grade of engineers, we have the 
same prejudice to deal with where we try to do away with the 
isolated plants that are among us. I would add to the ob- 
stacle of the engineer's prejudice another item and I must 
ask those engineers who are in this room who are on that side 
of the business to excuse me for mentioning it and that is 
the so-called self-interest of the consulting engineer. It can- 
not be the interest of the investor whom the engineer is sup- 
posed to advise, because it is easy of demonstration as to 



422 ADDRESSES OF SAMUEL INSULL 

which is the most economical course for that investor to 
pursue. 

Such conditions grow up over a period of years. People 
are unconscious of losing any money and therefore they are 
perfectly willing to continue to lose money. But take the large 
energy-using enterprises of the country : it does not seem reason- 
able to suppose that the bankers who have provided the money 
would take the position that they do not want that money 
spent in the most economical way possible; that does not seem 
a reasonable proposition. It is easy of demonstration in any 
considerable amount of territory which carries over its area a 
considerable population that the economical course is to pro- 
duce energy in large quantities. That is as simple a manufac- 
turing proposition as producing lamps in large quantities. 
Then the energy should be distributed over as large an area as 
can be economically operated from one center. 

BUT PREJUDICE SHOULD NOT STAND IN THE WAY OF 
ECONOMICAL OPERATION 

This is capable of demonstration not only from the point of 
view of the large cities but from the point of view of small 
communities. Take, for instance, the figures of the northern 
end of Illinois, with which I am personally familiar, not only 
statistically, but with the territory, because I live in it. Sev- 
eral years ago there were isolated central-station plants oper- 
ated separately with load factors by themselves of 13, 14 and 
15 per cent. Assuming the value of those particular plants, 
just the generating stations by themselves, at $175 to $180 a 
kilowatt, I can show you in that same territory, after building 
substations and transmission lines and increasing the invest- 
ment per kilowatt over twice, that owing to the changed con- 
ditions the permanence of the service, the low cost of the 
energy and the resulting increased power business the load 
factor improved so that today it is practically 28 to 30 per cent. 
The business, from being just a little shoestring business which 
no one would care to give any particular attention to, grows 



DISTRIBUTION OF ENERGY 423 

to formidable proportions, is easily financed, and is put on a 
basis that is a credit alike to the owners and the users, and a 
great benefit to the territory that is served. 

If you extend the business a little farther and take in the 
larger towns in the territory; if you go still farther south and 
embrace a large portion of the state, where they use energy for 
general transmission purposes, for interurban roads, for pump- 
ing water to drain the land in one place and to irrigate it in 
another place, for moving machines to cut the coal under- 
ground and produce the manufactured articles on the surface, 
a situation is produced where you have a load factor, owing 
to the diversity of the various businesses using the power, as 
large as you can get in any large city in this country. 

These are not mere theoretical figures and conclusions. I 
am responsible for probably $250,000,000 invested in the 
business which is operated broadly on the policy that I have 
been trying to enunciate to you today. It is not a policy that 
is peculiarly my own. It is a scheme that has been worked 
out rather from the bottom than from the top. The week 
before last I traveled about 1200 miles by automobile through 
New Hampshire and Vermont, and I was surprised to see the 
number of small transmission systems operating through that 
territory. I was very much surprised to see to what an extent 
all the energy in a given territory was produced from one 
source. I had thought that we were doing more of this class 
of central-station work in the Central West, and especially 
in the Far West, where they have such large water-powers, and 
I was very agreeably surprised to see how much of it is being 
done in the old-fashioned East. 

I see no reason why the prejudice of an engineer who de- 
sires to have the largest possible units in his company's generat- 
ing station should stand in the way of the economical operation 
of the properties under his control. I see no reason why you 
should have a transmission system twenty or thirty feet above 
the ground, another one on the ground and another one twenty 
or thirty feet under the ground, and still a fourth one running 
parallel with that, each operating separately as is the case in 



424 ADDRESSES OF SAMUEL INSULL 

New York. 1 We fortunately live in a country where we have 
not reached the point of saturation, and where the possibilities 
of our business are tremendous. There is not any great differ- 
ence between our business and the transportation proposition. 
You take any large city of the United States, and every new 
scheme of urban transportation that is laid out is practically 
filled and overflowing before it comes into use. 

It is the same with our business. Before we can build a 
generating station we have the customers to absorb the energy 
that that station produces. A unification of the power gen- 
eration and distribution in the large cities and in the country 
districts, especially in the manufacturing country districts, 
would have the effect of releasing a very large amount of 
capital temporarily. I do not mean to say that it is capital 
that would go into the bank; it would be very largely in the 
shape of copper. It would take but a few years for that to be 
absorbed by increased uses, and the service could be given 
cheaper. Or, if it is cheap enough now, and there is not a suf- 
ficient return being obtained on the investment, a greater 
return could be obtained from the investment. 

THE FUTURE OF ENERGY DISTRIBUTION 

I am expected to say something about the future of the 
distribution of energy. It is a little dangerous to predict 
what is likely to happen. I am absolutely positive that the 
necessity for the conservation of the fuel resources of this 
country will force the concentration of the production of energy. 
Tomorrow Mr. Vanderlip 2 is going to talk to you on the financial 
outlook, and I presume he will have something to say of the 
enormous sums of money required by the electrical business to 
finance it properly. I think, when you have listened to the 
figures which he must necessarily use, that you will come to 
the conclusion that the economical financing of this great busi- 

1. Alluding to the elevated-railway, surface-railway, subway-railway 
and central-station electricity-supply distributions. 

2. Mr. Frank A. Vanderlip, president of the National City Bank of New 
York. 



DISTRIBUTION OF ENERGY 425 

ness in the future will force the concentration of the production 
and distribution of energy over such areas of our country as 
have great density of population. 

It looks to me as if we are approaching an era when the 
business of producing and distributing energy will come into its 
own. You all know the vivifying effect on business of a given 
territory from the development of first-class transportation 
systems. Picture to yourself what must* take place in this 
country, certainly east of the Mississippi River, from the de- 
velopment of general systems of energy distribution. To my 
mind this territory will be a network of lines for transporting 
electrical energy. And when that time comes, energy will 
be purchased as energy; it will be used for whatever purposes 
it may be required, such as in transportation, in the homes 
of our people, and in our manufacturing establishments. Our 
great trunk lines of transportation, certainly within fifty or 
sixty miles of their termini, will be purchasing that power 
to operate their trains. Electrical energy will perform the 
same functions for the whole community, whether in the great 
cities or in the hamlets and villages, that the small water-powers 
of New England perform for the small communities in which 
those water-powers were established. 

There is another side of this matter that it is well for us to 
consider. While I suppose most of us engaged in this business 
are fascinated by its constructive possibilities, after one reaches 
a certain point one likes to feel that besides doing his duty 
to his associates and to those who entrust him with their 
money, he is contributing something to the progress of the 
country in which he lives and of the people among whom he 
has his abiding place. I think it is a great privilege to us in 
this business of course I naturally refer especially to us on the 
operating side of it that we are engaged in a business that 
has such great possibilities, not only of results to ourselves 
and our stockholders but in the great advantages that this 
business is capable of bringing to the people of this country, 
and the great part it must take in the future in the solution of 
some of the great industrial problems with which this country 



426 ADDRESSES OF SAMUEL INSULL 

is confronted. Providing that labor can be secured, I do not 
think it is at all a wild statement to say that in relatively few 
years there will be very few parts, certainly of the eastern 
states and the central western states, where energy cannot be 
bought at such prices as will enable a manufacturer to operate 
his plant economically, either in the smallest community or in 
the largest center of population. It is that point to which I 
am trying to work wherever I am operating, more especially 
in the great state of Illinois, which has been so kind to me for 
the last quarter of a century. My main reason for coming here 
is not to give you any new message, but to try to bring home 
to you the truths that come to me every day when I am running 
my business at home; namely, that there is only one possible 
way to develop this business to great permanent success, and 
that is on a basis of low cost of production, a minimum cost of 
distribution and a minimum selling price to the community. 



ELECTRICAL SECURITIES 1 

WHEN I was asked to talk to you on the subject of 
electrical securities I was somewhat at a loss to 
know exactly what branch of that question to discuss 
before you. If I were talking to some of my friends and I 
am glad to say that I think I count among my friends the in- 
vestment bankers of this city I should probably deal with 
the question of trust deeds and the desirability of making 
them as liberal as possible to the companies putting out the 
securities, and of the extreme necessity of that liberality in 
order to protect the borrower in time of stress. But as that 
branch of the subject is more or less of a controversial one, it 
occurred to me that what would probably interest you more 
would be to hear my point of view as to what should be the 
character of the property and the character of the operation of 
the property covered by a mortgage. 

I do not mean that you should infer that my opinion is 
that as investment bankers you are alone interested in prior- 
lien securities. If those securities are to command high credit, 
they must have behind them junior securities conservatively 
issued bearing a close relation to the money invested in the 
property, to the gross income, and also to the net income of the 
property over and above the prior-lien charges. But, as your 
point of view is mainly that of the bond dealer, I shall not have 
much to say about junior securities. 

There is no necessity of my trying to give you information 
as to what should be the character of the communities in which 

1. An address, somewhat condensed, given on October 30, 1913, at the 
convention of the Investment Bankers' Association of America, held in the 
Blackstone Hotel, Chicago. It was during the progress of this speech that 
Mr. Insull gave utterance to the epigrammatic expression describing "a greater 
saturation of the dollar invested with the electrical energy produced." 

427 



428 ADDRESSES OF SAMUEL INSULL 

these securities are issued and the necessity of having ample 
population, high purchasing power of the people in the territories 
served, or the necessity of having large industrial development 
to produce the necessary income to protect the securities. 
That subject you are far more familiar with than I am myself. 
My intention is to show you something of the operation of the 
electric-light-and-power business in this immediate territory. 

The subject to my mind can be presented to the best 
advantage graphically, and I shall therefore show curve sheets 
and tables which will tell their own stories to a large extent 
and require relatively but little explanation from me. 

Two KINDS OF ENGINEERING, AND THEIR VALUE 

Assuming that the property is there on which the securities 
are issued, and that the necessary money has been provided for 
the development of the business, the matter of real fundamental 
importance in connection with its operation is engineering. 

There are two classes of engineering that we have to use in 
our business. There is the mechanical and electrical engineer- 
ing, the engineering of construction, on the one side, and 
first-class selling engineering, the engineering that governs the 
getting of business, on the other side. Thus, it matters not how 
much money has been put into a property, or how conservative- 
ly the securities may have been issued, or how good is the 
prospect of business in the community, unless the engineering 
of construction is laid out on the most enlightened lines, good 
results will not follow. [Mr. Insull illustrated this statement 
by using the " conservation-of-coal " diagram, which, brought 
down later, is given in the next chapter, page 469.] 

Having true engineering of construction as a basis, we come 
to another side of the business ; that is, the engineering of selling. 
Fig. 1 shows that, starting in 1896 with a gross business of about 
$1,000,000, and increasing year by year, we had in 1912 a total 
business of $15,500,000, divided as follows: Light, a little 
over $8,000,000; power a little below $4,000,000, and the supply 
of energy for transportation purposes a little below $4,000,000. 



ELECTRICAL SECURITIES 



429 



It is interesting to note how closely the output figures 
(Fig. 2) follow the figures of money. Referring again to the 
curves of Fig. 1, you will notice that they follow very closely 
similar lines as shown on Fig. 2, so far as the total is concerned, 
but with a much sharper line so far as railways are concerned. 
The cause of the difference between those two curves, that is, the 



DIAGRAM 

SHOWING EARNINGS 
FROM SALES OF 

ELECTRICITY 
YEARS 1895 to 1912 




y 



/ 



$10,000,000 



$14,000,000 



$12,000.000 



$10,000,000 



88,000,000 



$6,000,000 



$4,000.000 



$2,000,000 



1900 1902 1904 1906 
YEARS ENDING DECEMBER 31 

Fig. 1. Results in Chicago 



1910 1912 



money curve and the output curve, is the fact that in the de- 
velopment of our business we have probably carried to a greater 
extent than the majority of electric-service corporations the 
wholesaling of our energy, as is especially shown with relation 
to the output of energy for transportation. 

This is illustrated again by this dollars-and-cents diagram 
(Fig. 3) with relation to income per kilowatt-hours sold. 



430 



ADDRESSES OF SAMUEL INSULL 



The income from light shows a steady drop per unit sold 
from 1898 to 1912, amounting to about 40 per cent hi price per 




400,000,000 
300,000,000 
200,000,000 
100,000,000 



1904 1906 1908 

CALENDAR YEARS 

Fig. 2. Results in Chicago 

kilowatt-hours sold. The power income follows somewhat 
the same curve. It started at a lower price and necessarily 
ends at a lower price. The wholesaling of energy for transpor- 
tation purposes runs along on a very steady line. In the first 



10 

cts. 



ct 5 s. 



eS. 



INCOME PER 
KILOWATT HOUR SOLD 



8 
ots. 



o 7 ts. 



Its 
c 4 ts. 



2 
cts. 



1900 



1902 



1904 1906 

CALENDAR YEARS 



1908 



1912 



Fig. 3. Results in Chicago 



ELECTRICAL SECURITIES 



431 



three years the price did not vary. As the business developed 
the price dropped in 1906, and that price continues practically 
up to the present time and is on a basis lower than it is possible 
for the local transportation companies of this city to produce 
their energy themselves. 

Fig. 4 shows another result of combining commercial 
engineering and the engineering of inventions. This diagram 
gives you the amount of electric light that could be bought for 



AMOUNT OF ELECTRIC LIGHT TUNGSTEN LAMPS 


J 




9.000 


THAT ONE DOLLAR WOULD BUY 
YEARS 1886 TO 1913 
EXPRESSED IN CANDLE HOURS 

LAMP EFFICIENCY INCREASED 268% 
RATE DECREASED 61.5 % 












8,000 
7.000 
6,000 
















Sdnot 










TANTALUM LAMP 




i 










CANDLE t- 


5,000 
4.000 
3.000 
2,000 
1.000 




























































1886 



Fig. 4 



one dollar in 1886, running absolutely even until 1898. Then 
the number of candle-hours was increased. Now, partly from 
the lowering of prices and partly from improvements in in- 
ventions, the lamp efficiency having increased 268 per cent and 
the rate having decreased 61.5 per cent, the amount of electric 
light that can be bought for one dollar has increased enormously. 1 
That to my mind shows the fundamental principles govern- 
ing this great business and affecting the value of securities 
issued better than any curve that I can present to you. The 
improvement in efficiency is a tribute to the genius of the great 
inventors the world over, and the decrease in rate is a tribute to 

1. See also Fig. 30 of the chapter on "A Quarter-Century Central-Station 
Anniversary Celebration in Chicago," page 327. 



432 ADDRESSES OF SAMUEL INSULL 

the ability of the selling engineers of the various corporations of 
this country. That curve would not vary very much in any 
large center of population in the United States. 

The lowering of rates has been brought about by means of 
hearty co-operation on the part of the selling-engineering talent 
of all our great companies throughout the country. The im- 
provement in lamp efficiency has taken place following the 
marvelous inventions of Mr. Edison, whose name stands at 
the head of our industry, and whose work has been supple- 
mented by that of many other inventors, both in this country 
and on the other side of the ocean. 

This question of commercial engineering has a very im- 
portant bearing on a third important point, insofar as the 
character of the securities that you are dealing in is concerned. 
I refer to the relations with our customers and the relations 
with the communities in which the business is operated. 

In Fig. 5 is shown the highest rates charged in forty-three 
large cities in the United States. They are for dwelling houses, 
stores, manufactories, all-night establishments and so on, and 
without any reference whatever as to whether the energy is 
produced from steam or from hydro-electric plants. The curves 
represent what the companies charge for energy without ref- 
erence to the cost of the product. The second one shows 
the average of the forty-three large cities. The Chicago rates 
are shown in the third curve and the minimum rates of the 
forty-three large cities is shown in the lowest curve. 

The branch of commercial engineering to which I have 
given particular attention during the last ten years is that of 
wholesaling energy in very large quantities. Backed by the 
courage of a body of investors who have stood behind me for 
upwards of twenty years in developing the business here in 
Chicago, ever ready to provide funds, so that starting with 
$1,000,000 we have got to a point where we have between 
$70,000,000 and $80,000,000 invested in the business, we have 
been able to try a great many experiments here in selling energy, 
some of which have been very much criticized. As a result we 
have been able to bid for classes of business not ordinarily 



ELECTRICAL SECURITIES 



433 



supposed to be handled by electric-light-and-power companies, 
who, as a rule, deal with retail business. What we are aiming 
at, and probably what everybody else is aiming at, is to get the 
greatest possible amount of output for the least possible amount 
of investment. One of the great difficulties in connection with 
the financing of the electric-light-and-power industry, and in 
connection with the sale of its product, is that it is impossible 
to store our product economically. In that respect we are 



COMMONWEALTH EDISON COMPANY 

LIGHTING RATES 

COMPARED WITH RATES OF 

43 LARGE CITIES 



6 ROOM ALL N GHT 

10 ROOM APART- RETAIL PRIN ING MANIJFACT- LUNCH DR 

ICE DWEtllNQ MENT STORE SH.OP IJR7NQ SAt ON ROOM S7 




Fig. 5. A Comparison of 1913 

at a decided disadvantage as compared with the generation 
and distribution of gas. As you all know we have to make our 
product at the same moment that it is sold, so that the problem 
before the commercial engineer, who is desirous of getting the 
greatest possible income out of his investment and to make the 
best possible showing for his securities at the lowest possible 
charge for energy, is to keep that investment working for as 
many hours of the day and days of the week as it is possible 
to do with due regard for safety of operation and permanency 
of service. 

The great point that we all have to overcome is the maxi- 
mum-load peak. We have to make the investment necessary 
to take care of that, and the problem before us is to fill up the 
valleys in the load curve. At the prices we get for energy in 



434 ADDRESSES OF SAMUEL INSULL 

this community, if we could not fill up the valleys to a large 
extent I doubt very much whether we could pay interest upon 
our funded debt, notwithstanding the fact that all of our 
junior securities are represented by cash invested to the amount 
of about $120 for every $100 of stock issued. 

We started out to fill up the valleys more than is ordinarily 
done. By 1912 we had broadened the peak and partially 
filled up the valleys and had put ourselves in a position so that 
we were using our investment 31 per cent more of the time than 
we were using it in 1902. First-class commercial engineering 
is of primary importance in developing electrical industries. 
The advantage of using your investment 25 per cent more than 
the other man is able to use his investment makes the difference 
between ordinary earnings on the dollar invested and very 
favorable earnings on the dollar invested. 1 

Practically the greatest items of expense that we have to 
deal with are interest, and to a less extent depreciation, and 
these are the controlling influences with relation to rates. It 
is not the price of coal, nor the price of labor: it is the price of 
money that governs; and if you are only using that money 42 
per cent of the time the cost of money per unit of output must 
be very materially greater than if you use that money 55 per 
cent of the time. To you as bankers that is a self-evident 
proposition. 

I think, if I had to choose between first-class construction 
engineering and first-class selling engineering, inasmuch as the 
possibility of mistake is far greater in the selling side of the 
business than in the construction side of the business if I 
had, as I say, to choose between the two I would choose first- 
class selling engineering, as it would give me more money on the 
dollar invested with which to make up for the mistakes made 
by the constructing engineer. Consequently, to my mind, the 
item of paramount importance to you is not the replacement 
value of the central station; it is not the replacement value of 
the electric-power-distribution system. The matter, to my 

1. See curves in Fig. 14 of chapter on "The Relation of Central-Station 
Generation to Railroad Electrification," page 280. 



ELECTRICAL SECURITIES 



435 



mind, as an operating man, paramount in importance to you 
gentlemen is that the selling organization of the companies 
with which you deal should be of the highest possible order. 
And when dealing with the securities of public-service com- 
panies, you should see to it that their engineering methods 
are of the most enlightened nature, so far as the selling of their 
product is concerned. 



16,000,000 



6,000,000 



1,000,000 



SOURCE OF 
CAPITAL FOR 
ADDITIONS TO 

PLANT 
YEARS 1908-1912 




z 



*6,000,000 



3,000,000 



1910 1911 

YEARS 

Fig. 6. Results in Chicago 



WHERE THE CAPITAL COMES FROM 

The curves in Fig. 6 give you some information as to where 
the capital comes from to increase the facilities of a large 
organization. It covers the period from 1908 to 1912, and, in 
part, 1913. 1 The dotted line shows the money supplied by 
new capital. The lower solid line shows the money supplied 
out of surplus, various reserve accounts, replacement accounts, 
depreciation accounts. And the upper line shows you the total 
expenditures for capital account over the period. It is not 
possible for all organizations to show that relationship. There 
are a good many first-class electricity-supply organizations in 
this country where the relation of new capital used to capital 

1. Since the delivery of this address the diagram has been made complete 
for the years covered. 



436 



ADDRESSES OF SAMUEL INSULL 



supplied out of the operation of the business is very much 
closer than in this case. I simply show this curve to give you 
an idea of what can be done in a large organization; to show 
you what a large proportion of money obtained from the 
operation of the business goes into the improvement of your 
security, namely, the investment in a plant and distribution 
system. 

The tendency of that curve, if plotted for all the companies 
whose securities you gentlemen sell, or, certainly, for 90 per 



200.000 




$5,000,000 



4,000,000 



~ 3,000,000 



2,000,000 



l.COO.OOO 



1904 1906 

YEARS 



1912 



Fig. 7. Results in Chicago 

cent of the companies whose securities you sell, while it might 
not show the same proportions, would be, in general, the same. 
So far as I know, there is no branch of industrial work in 
which the tendency toward conservatism, so far as charging 
to capital is concerned, is so great as in the electric-light-and- 
power business of this country. This comes from a number of 
causes partly from the effect of first-class engineering and 
partly from a greater realization on the part of people operating 
properties that their tendency should be toward greater care 
as to charges against investment account, with a realization of 
the great necessity for reserve accounts. This increased con- 
servatism comes from a greater knowledge of the business on all 
sides of it. 



ELECTRICAL SECURITIES 



437 



I am dwelling on this subject of investment, or spending of 
money for investment in relation to the selling of the product, 
to an extent that you may probably think is somewhat irksome; 
but it is so important that I have tried to express this same thing 
in another way in the curves of Fig. 7. We start in 1898 with 
not much over 5,000 customers and end in 1912 with 180,000 
customers. 1 In 1898 our investment per customer was $1,579, 
and our gross income per customer was $210. In 1912 that 
investment dropped to $417 per customer, and the income had 



12 



11,189,000 



5 6,16 ,000 



$80,000,000 



$40,000,000 



189G 1893 1900 



1902 1904 
YEARS 



1906 



1908 1910 1912 



Fig. 8. Results In Chicago, Showing Relation of 
Cost to Income 

dropped to $87 per customer. While steadily reducing our 
price and endeavoring to put ourselves in closer accord with 
our customers, we have at the same time produced a greater 
saturation of the dollar invested with the electrical energy 
produced and reduced the investment to $417 per customer. 
Improvement in that period shows that the relation of income 
to investment in 1898 was 13.33 per cent, and in 1912 was 21 
per cent, with the necessarily accompanying result of a steady 
increase in net income from operation. 

In Fig. 8 are other curves bearing on practically the same 



1. The number of customers of the Commonwealth Edison Company on 
February 1, 1915, was about 254,000. 



438 ADDRESSES OF SAMUEL INSULL 

subject. They show that the cost of energy per kilowatt-hour 
sold in 1896 was about 12 cents per kilowatt-hour and our 
income was a little over 10 cents a kilowatt-hour, and yet we 
were paying our stockholders 8 per cent on their stock. There 
were two causes for this anomalous condition of affairs. At 
that time we made large profits from merchandizing electri- 
cal apparatus. The people in control of the management of 
the property at that time laid more stress on selling apparatus 
than on selling energy, and I am sorry to say I was at the head 
of the organization. That is one cause. Another cause is 
that in 1896, about a decade and a half ago, we knew so little 
about our business that we did not know how to figure our cost. 
If we had known how to figure our cost, we might have had 
greater anxiety as to the outcome. In Fig. 8 there is also a 
line showing the income per kilowatt-hours sold, and you will 
find extremely close relationship between the two curves of 
cost and selling price, illustrating the steady policy of reducing 
our rates. The "total-investment" line shows the growth of 
our investment from less than $8,000,000 up to about $80,000,- 
000. Another line gives our output, starting at 11,000,000 
and going up to 712,000,000 of kilowatt-hours sold. 

You will notice that in the earlier period, when we knew far 
less about commercial engineering than we know today, the 
output and investment ran right along on parallel lines. It 
was less than ten years ago that we began to change. You 
will note in later years we have kilowatt-hours shooting up while 
total investment keeps on relatively even keel. That partic- 
ular curve is very easily worked out for any large or small 
electricity-supply company, whether it be a lighting company 
or a power company or a diversity of both businesses, if records 
have been kept. 

If I were judging of the character of securities, I would lay 
greater stress on the general information which can be obtained 
from such a curve sheet as to the business policy, the ability 
to sell the product properly, and the ability to get the best 
results out of the smallest amount of money invested. I 
would be more influenced by the general policy of the adminis- 



ELECTRICAL SECURITIES 439 

tration of that business as shown by such a curve sheet than by 
almost any other information I could obtain. 



As TO THE SCRAPPING OF SMALL PLANTS 

The figures I have given you so far relate to a large central 
power station and distribution system capable of supplying 
energy for a community of perhaps 2,500,000 population. The 
experience that we have obtained in this community of the 
relation of one class of business with another, and the ad- 
vantages to be obtained from a great diversity of business, has 
led us farther afield. [The speaker then explained the pos- 
sibilities of concentrating the energy supply for the power- 
using utilities (except trunk-line railroads) of the state of 
Illinois, outside of Cook County, as given in the Franklin In- 
stitute paper on "The Production and Distribution of Energy.'*] 

Naturally, it may occur to the minds of some of you gentle- 
men that all these small plants exist; that they are all doing 
some business, and that if they are thrown away and large 
centralized plants are built to take their place, you are wiping 
out capital on which securities have been issued. Theoretically, 
that is correct. But the facts are these: There is scarcely 
a small community in the Central West where any business is 
done except street lighting and house-to-house lighting, and 
perhaps the pumping of the water locally. The cost of produc- 
tion is so high that these small plants cannot possibly sell 
energy for industrial or transportation purposes. 

These plants must disappear. They are bound to be 
wiped out. The business of generating energy for use in the 
communities that they serve must be taken over by a large 
establishment, having economical apparatus in the form of 
generating plants connected with large distributing systems. 
It will then be possible, in these small communities, to distribute 
economically energy for transportation and manufacturing 
purposes. By that means the value of the investment in small 
local distribution systems will be increased by broadening the 
usefulness of these systems. This will help to preserve the 



440 ADDRESSES OF SAMUEL INSULL 

integrity of the securities that a great many of the investment 
bankers have taken on the small plants throughout the country. 

It is the recognition of the economies of this principle of 
concentration which has led some of us to go farther afield 
in our business and not only deal with the large communities 
but also with smaller communities by uniting a number of small 
communities in one large distribution system fed by one or 
more generating plants. 

This side of the business has other things to recommend it. 
As a rule, country plants are badly run, badly constructed; 
and their absorption by large systems means better service 
for the various communities served at lower prices, and con- 
sequently increased popularity on the part of the operating 
company. 

THE FINANCING OF HOLDING COMPANIES 

The recognition of the great advantage of diversity of load 
has led to the establishment of large operating companies, some 
of them being holding companies with separate subsidiary 
operating companies. In speaking on this subject I am com- 
ing back to what I consider the interest of the investment banker 
in junior securities, just as much as it is of interest to the na- 
tional banker or private banker to know what is the general 
credit and general standing of the individual he loans money 
to, even if in loaning that money he has ample collateral security 
for the loan made. 

The great danger of the holding-company proposition is 
the issue of junior securities of subsidiary companies, these 
junior securities being sometimes put into collateral trusts of 
the holding company for the purpose of creating collateral 
for so-called prior-lien securities of the holding company. If 
the deed of trust underlying the collateral-trust securities is 
rigid enough to protect the purchaser of those securities against 
the creation of large floating debt in the operating company, 
and if the bond issue of the operating company is small and is a 
closed issue, there is no reason why the stocks of operating 
companies should not be put up as security for collateral- trust 



ELECTRICAL SECURITIES 441 

bonds of holding companies. That is a side of electric financing 
which, to my mind, deserves the very serious thought of you 
investment bankers. The mere creation of so much paper 
does not add any more to the actual cash invested in the 
companies, and when you are considering electrical securities 
you ought to be fully informed as to the value of the property 
mortgaged, the relation of that value to the securities issued 
and to the gross and net income of the property. If the spread 
between the gross and net income is very great, you ought to 
look most carefully into the relation that the company issuing 
the securities holds towards its customers and the communities 
in which it operates with a view to finding out whether the 
company is exacting an excessive price for its product. 

BANKERS AND UTILITY MEN SHOULD NOT OPPOSE REGULATION 

A subject that has been referred to here to quite a large 
extent, as I judge from some of your committee reports, is 
the question of regulation local regulation and state regula- 
tion of the public-service industry. Personally, I think that 
state regulation is the best thing that can possibly happen to 
this industry. Talking in another hotel in this city not far 
from this spot, in my presidential address 1 to the National 
Electric Light Association, on June 7, 1898, I stated that 
"Public control of charge for service, based on cost plus a 
reasonable profit, and eliminating the factor of competition, 
is the proper safeguard for the interests of users, taxpayers and 
investors." I am still of* the same opinion. So far as I have 
seen, in almost every case where regulating commissions have 
been created, while there may have been isolated cases of 
injustice to one or another of the companies regulated, generally 
speaking the results obtained have been good for the industry, 
have been good for the securities, and have been good for the 
people of the communities in which we operate. 

1. Reprinted in this collection under the title "Standardization, Cost 
System of Rates, and Public Control." The sentence quoted will be found on 
page 47. 



442 ADDRESSES OF SAMUEL INSULL 

I would venture to say, gentlemen, that in the principal 
cases where regulation has been apparently unfriendly to a 
property, if you could trace the management of that property, 
you would find that the people in control of it had not a proper 
appreciation of the underlying principles governing the business. 

Take, for instance, the advantages to the company of 
regulation. I would very much rather operate under a low 
rate and know that that rate had the endorsement of some 
administrative state body, and know exactly where I stand, 
than to be harassed by, say, a board of aldermen, who are main- 
ly governed by political considerations, whereas an administra- 
tive board, when it understands the business, if its members 
are honest men, gives us a fair return on the money we have in- 
vested, provided that money has been judiciously spent and 
provided that the business is judiciously run. 

Stability of rates is one advantage we get from regulation, 
and regulation must necessarily be followed by protection 
against competition. The great economic waste of competition 
in a business which is naturally a monopoly must be brought 
home by the establishment of commissions or some other 
form of regulation on the part of our various states and as a 
result we are sure to get protection for our investment and 
consequently for our securities. 

Probably I am a little liberal on this subject because my 
boyhood was spent in a country where rates of public service 
are regulated by the Board of Trade, where capital expendi- 
tures have to be authorized by Act of Parliament and where 
no public-service operation can be* done without legislative 
action on the part of Parliament; and yet the securities of the 
properties so regulated stand very well in the communities in 
which they are established. 

What is the advantage of regulation to the investor? After 
all, you gentlemen represent the investor. Regulation will 
prevent overcapitalization. It will prevent a lot of watered 
securities getting into the hands of the unsuspecting public 
I do not mean through the agency of the members of the In- 
vestment Bankers' Association but through the agency of an 



ELECTRICAL SECURITIES 443 

entirely different class of security dealers. Protection against 
competition must necessarily add to the stability of the in- 
vestment. 

If you have steady rates based upon costs of service and no 
competition, and regulation of capitalization, you must of 
necessity have permanence of investment. My main message 
in speaking to the investment bankers of this country is to say 
that they and men in positions like myself make a very great 
mistake in opposing the fair regulation of an industry which 
can only be run as a monopoly; and no business should be run 
as a monopoly without a fair oversight on the part of the state. 

[Mr. Insull displayed views of generating stations of the 
Commonwealth Edison Company before concluding. Some 
of the pictures are scattered through this book.] 

STABILITY OF INVESTMENT 

Before I sit down I want to talk a little on the subject of 
stability of the investment. Many of you are engineers who 
in figuring replacement values must be fully aware of the very 
small amount of the investment that is really scrapped. I do 
not recall any case where scrapping on the part of first-class 
engineers has ever been more than 25 per cent of the value of 
the property; and in my judgment, taking the average of the 
properties today, that is a very large percentage. If you have 
a fair margin of investment to protect your prior-lien securities, 
the scrapping of a plant is of little or no consequence to you. 
Take the buildings that I have just shown you; they certainly 
have a life equal to a building of the character we are now in. 
Take the machinery. Boilers have not changed much in my 
day except that we get a higher efficiency out of them. Steam 
piping is relatively the same. If it is changed at all it is mostly 
a change as a result of bad engineering on the part of the 
operating company. Take labor and material. I have not dis- 
covered myself that labor is going down or that the items 
that go into the cost of building are reduced in price. Take 
copper and all the various elements that go into insulation. 



444 ADDRESSES OF SAMUEL INSULL 

The general tendency of values is up all the time, and con- 
sequently, from my point of view, gentlemen, you have little 
or nothing to fear from even such drastic scrapping as may 
necessarily take place in changing the electricity supply of a 
series of small communities to a central system, operating over 
a large area. 

If reasonable protection is exercised in the establishment 
of reserve funds, and if above everything else the business is so 
run that the relation with the customers, and the relations with 
the community, are fairly cordial, I do not think you have any- 
thing to fear in taking the securities of the energy-supplying 
companies, certainly not those in the densely populated and 
productive portion of the United States. 



CENTRALIZATION OF ENERGY SUPPLY 1 

THE SUBJECT on which it is my privilege to address 
you this evening is one which, under one title or another, 
it has been my pleasure to speak to in this city many 
times. The business in which I am engaged is essentially a 
monopoly business. At the outset I want it understood that 
I appear, not with any brief for monopoly, but to speak of the 
centralization of energy supply as necessarily a monopoly on 
purely economic grounds. It would be absurd for every house- 
holder to have his own water supply, his own gas-producing 
apparatus, his own method of disposition of sewage, a trans- 
portation system for his own use, or methods of communication 
by wire purely for his own use. These things would be no 
more absurd than it would be for the individual to have his 
own methods, his own apparatus, for his own individual use for 
the production of electrical energy. 

The individual-supply idea is economically wrong. There 
is absolutely no good reason for it. The economics of the situa- 
tion demand that the supply of energy, whether it be for use in 
private residences, for use in the store, for use by the manu- 
facturer or for use by the transportation company, come from 
one central source. If the most economical results are to be 
obtained; if capital is to be conserved; if labor is to be conserved; 
if the prime source of power, whether it be the coal in the 
ground, or the waterfall tumbling down the mountainside, 

1. An address delivered before the Finance Forum of the Young Men's 
Christian Association in New York on April 20, 1914. This body established 
a course of lectures in relation to public utilities. It invited the co-operation 
of men of prominence familiar with the financial, engineering, operating and 
manufacturing aspects of these utilities. The response was prompt and cordial. 
In accord with the purpose of diffusing knowledge on the subject, an advisory 
committee of New York business men interested in utilities assisted the Y. M. 
C. A. in its program. Mr. Insull's lecture was one of this course. 

445 



446 ADDRESSES OF SAMUEL INSULL 

is to be conserved in short, if we are to get the very 
best possible results alike for the user of the energy in 
low prices and for the producer in giving him a fair return 
on his capital, it is essential that the business of supplying 
that energy shall be centralized in one large organization for a 
given area. 

So convinced am I of this fact and I hope that my ex- 
amples which will be shown to you this evening will convince 
you of the fact that it would seem to me that in these days 
of regulation, in these days of preaching of economic operation 
of our various public services, the day will come when some 
of these great regulating bodies which are so absolutely neces- 
sary in a business which must naturally be a monopoly will 
question the waste of capital, the waste of fuel, and the waste 
of effort that goes on where the production of energy, instead 
of being centralized, is carried out on a basis of separate supply 
to separate classes of business and separate classes of users. 

THE BROAD VIEW VERSUS THE NARROW VIEW 

One great trouble in dealing with this subject is that it is 
usually viewed by those who discuss it from the point of their 
own particular interests; I might almost say from the point of 
view of their prejudice. They do not, usually, take a broad 
view of the subject; that is, as to what is best for the whole com- 
munity; but they discuss it from the point of view of pride and 
satisfaction in the manufacture of energy in the particular 
generating station in which they are interested. Those of us 
who take, as we think, the broader view must overcome that 
prejudice, the prejudice of the engineer, the prejudice of great 
captains of industry, who, however well informed on the par- 
ticular line of business to which they have devoted their lives, 
know little or nothing about the economics governing the pro- 
duction and distribution of electric energy. 

There is another class of men who discuss the subject. I 
remember particularly a discussion of it within the last few 
months by a distinguished European engineer before one of 



CENTRALIZATION OF SUPPLY 447 

the learned societies of Europe. 1 This gentleman took up the 
subject with little or no knowledge of our conditions, unac- 
quainted with the character of the service we supply, or the 
cost of that service, because of the various things demanded 
of us here that are not demanded in Europe. With little or no 
knowledge of the elements entering into our capitalization 
accounts, he came to the conclusion that the only method of 
handling the class of business about which we are to talk this 
evening is the method carried on in some European cities in 
which the corporations with which he is connected are mostly 
interested. 

While I am naturally obliged to use to a greater or less 
extent the figures compiled by the statisticians of the company 
with which I am associated in Chicago, I hope to draw lessons 
from these figures that will show you that, on broad economic 
grounds, for the best interests of the community, whether 
that community be in a large city or in a small country town 
or village, or even in a rural district, this class of business should 
be run as a monopoly. As I have stated, it should be a regu- 
lated monopoly, for no public service, privately owned, and 
operated as a monopoly, should be unregulated. It should be 
conducted on the basis of one system of distribution and one 
central source of production. If this course is followed all 
through, the best results will be obtained for all, the greatest 
possible conservation of our natural products will be achieved, 
with a much reduced price for the product charged to the 
consumer, while the greatest possible profit, within reasonable 
limits, will be the reward of those who have the courage to 
put their money into the enterprise. 

DIVERSITY OF DEMAND 
Fig. 1 shows the diversity of demand. The fundamental 

1. This refers to the paper on "Electricity Supply in Large Cities," 
presented by Professor G. Klingenberg, Ph.D., before the Institution of Elec- 
trical Engineers in London on December 4, 1913. Professor Klingenberg con- 
sidered the conditions of electricity supply in London, Berlin and Chicago, and 
then went into a discussion of the factors, or supposed factors, entering into 
the cost of electrical energy in the cities named. 



448 



ADDRESSES OF SAMUEL INSULL 



basis of profit making in public-service business is the diversity 
of demands. That is the difference between one human being 
and another, the desire of one human being to do one thing, and 
the desire of another human being to do something else, at the 
same time. I have used this particular chart a number of 
times, and so have a number of my assistants, to demonstrate 
this phase of the subject. The diagram represents a block of 



KENMORE AVE. 





WINTHROP AVE. 



Number of apartment customers 193 

Number of hall-lighting and garage customers 34 

Average number of lamps per customer 12 

Kilowatt-hours used per year 49,620 

Customers separate maxima 92 kw. =6 . 3% load factor 

Maximum at transformers 29 kw. = 20% load factor 

Annual income per customer $18 . 34 

Diversity factor 3.2 

Fig. 1. Electric Service for a Block of Apartment Buildings, Chicago, 
Illustrating Diversity of Demand 



relatively small apartments in the northern part of Chicago, 
193 apartments in all, and there are 227 meters in the block, 
being used by 193 apartment customers and 34 hall-lighting 
and garage customers. If you take each customer by himself, 
that is, each apartment by itself, the use of energy in each 
separate apartment is so slight that the investment to take care 
of that particular customer, if you trace it back to the generating 
station where the power is produced, would not be used on an 
average more than between six per cent and seven per cent 
of the time. But so varied are the ideas of human beings, and 
they so seldom do the same thing at exactly the same moment, 
that, if you take the whole 193 apartments together, and then 



CENTRALIZATION OF SUPPLY 449 

find out how much energy as a whole they use at one particular 
moment, the fact is developed that the diversity of their de- 
mand is so great that instead of using your investment only 
between six and seven per cent of the time, they use your in- 
vestment, when taken as a whole, twenty per cent of the time. 

If you will look around that neighborhood a little farther, 
you will find a number of local stores, motion-picture shows, 
and all the various types of small business establishments that 
go to make up a local community. When you add that busi- 
ness to the business of the apartments in the block, you find 
that you have increased the average demand on your invest- 
ment in that particular neighborhood to such an extent that 
your investment is used thirty per cent of the time. 

When you trace this load to the power station, you find that 
such is the combination of demands from several classes of 
business that these people in the residence territory call on you 
for the greatest amount of energy not when you require that 
energy to operate the office buildings and the elevators in these 
buildings, and the transportation system, and the stores and 
the workshops, but about two hours after all that work is 
practically closed down. 

The whole question of the economics of the business of elec- 
trical energy supply is really summed up in the few remarks I 
have made on that particular chart, and the information which 
is given on the chart. The question of profit and loss, of the 
possibility of selling at one price or another, is all involved in 
that. It is a question of the diversity of the demand affecting 
the average use of your investment. 

Fig. 2 gives similar information regarding an entirely dif- 
ferent class of business, and it shows precisely the same thing. 
It has been only in the last year or so that it was possible to 
register the exact time at which a given consumption of energy 
takes place. We have tried in this particular chart to give 
you information as to the diversity of very large light-and-power 
customers as distinguished from very small light customers as 
shown in the previous chart. 

The Chicago company of which I have the privilege of being 



450 



ADDRESSES OF SAMUEL INSULL 



the head was the pioneer in installing in the early days a 
demand-recording meter called the Wright demand meter, and 
in working out, from a very large number of these customers, 
a tabulation on the relation of the maximum to the connected 
load for customers of various sizes and various classes. Those 
actual statistics have been used by many companies and or- 
ganizations throughout this country in their rate-making 
schemes, which are based largely on the percentage of the con- 
nected load. The information given in Fig. 2 is the result of 



3RICK\A 




ANUFACTURERS 



CEMENT WORKS 
AND MISCELLANEOUS 



Fig. 2. Diversity of Requirements of Large Customers 

exactly the same policy applied to our large or wholesale cus- 
tomers. We have been installing, as fast as practicable, 
metering devices which furnish us the tape record of the half- 
hour readings of the wattmeter of each of our large customers, 
and the tabulation shown on this chart is the result of a study 
of 82 such customers. From this tape record we are able 
to plot the 24-hour load diagrams and get the highest maxi- 
mum for the year and also the load at the time of the total 
coincident maximum for the entire system, and thus arrive at 
the diversity. 

I believe this is about the first information of this character 
that has been published. It is the first I have seen myself, 
and to those of you who are familiar with the business the 
mere showing of the chart explains itself, but for the benefit 



CENTRALIZATION OF SUPPLY 



451 



of those who are not familiar with the subject I will give some 
detailed explanation. 

Referring to the chart (Fig. 2), the highest rectangle in the 
center of the chart represents the total amount of energy called 
for by the 82 customers that are represented in these smaller 
blocks shown around the large block. The maximum load 
on our system came on the 6th day of January, 1 and the demand 
on us for energy, as I will show partly from this chart and 
partly from subsequent charts, was so diversified that notwith- 



1000 



800 



600 



400 



200 









DEPARTMENT STORES 








1UUO 
800 
600 
400 
200 


*. 








NCOME PER CUSTOMER $35,800 














MOUNT OF 
NNUAL LOA( 


5IVERSI1 
) FACTO 

-I-"-. 




K.W. 
1.8% 

r 1 -, 














-^T- 


-T_|-l_ 








I 

1 








I 








L 






CO 


5 
* 
























= 
K 
































r 


TYPIC/ 


L MAX 


MUM L 


OAD D 


AQRAK 














f 












1 






-x_H- 


T_J 


n^ 


7 












k 


- r \ 


L 


M. 2 4 6 8 10 12 N. 2 4 -6 8 10 12 



Fig. 3 

standing it would have taken 26,640 kilowatts, or, roughly 
speaking, between 30,000 and 35,000 horse-power, to take care 
of the maximum demand of each one of these customers sepa- 
rately, on the day when the greatest demand came on us from 
all sources, it took only 9,770 kilowatts for these same customers. 
The difference between 26,640 kilowatts and 9,770 kilowatts 
represents what I have tried to explain to you as the diversity 
factor in our business. 

That variation of demand, or diversity, comes about from a 
great variety of reasons. For example, the brick-yards and 
quarries, represented in the upper part of the diagram, do not 

1. Speaking of the winter of 1913-1914. 



452 



ADDRESSES OF SAMUEL INSTILL 



run in the winter time, as the frost interferes with their business. 
The department stores represented by the block in the upper 
left-hand corner are particularly busy just before and just 
after Christmas, so that their demand is very high at that 
time. Referring to the block representing manufacturers, 
the workman cannot run a tool in a workshop assuming 
the workshop is meant for light manufacturing purposes and 
located in a high building he is unable to run a tool in the 
shop, go down in the elevator which takes him to the street, 



r?n 


























120 
BO 

fiO 

30 


I. 


J L 


M 


-jq 




NUM3E 
TOTAL 
WCOM 
INCOM 

LOAD 


PUBLIC GARAGES 




r 


90 
60 
30 



1 








] 


E PER CUSTOMER __ _ $6,500 




J 






j 


5 




r 




R 






I 






| 


5 
d 
jj 






















3 
E 








L 


TY( 


ICAL M 


AXIMU 


A LOAD 


DIAGR 


\M 














c 
























K. 


I 






H- 


j-_r- 
















s; 


J- 1 


J - 


1 








2 M. 2 4 6 8 10 12 M. 2 4 6 8 10 12 



Fig. 4 

travel on a street car, and use electric light in his home all at 
the same time. The maximum demand on the 6th of January 
came from all of these various sources, and you see that the 
manufacturer naturally shuts down before someone else is 
using the energy. Ice manufacturers do a relatively small 
business in zero weather. Therefore their demand is very light 
in the middle of winter. In the case of such heavy users of 
energy as cement works we make a special arrangement which 
provides that they shall shut off their demand at the period of 
our maximum load. In the case of steel, iron and brass works, 
their demand occurs before the period of maximum load on a 



CENTRALIZATION OF SUPPLY 



453 



dark winter day, and so on with the other classes of business 
shown in the chart. The result is that the diversity is so great 
that what cannot be produced economically separately can 
be produced economically as a whole. 

I am going to show you now in detail the various charts 
which represent the various businesses shown on the previous 
diagram. Fig. 3 represents the main department stores of 
Chicago. There are seven customers, seven department stores, 
the total annual income from which is $250,700, the average 





























500 
400 
300 
200 
100 


M. 


r,oo 

400 
300 
200 
100 


11 








TYP 


DAL M 


XIMUI 


1 LOAC 


DIAGl 


AM 


















r^ 


v. 


f 


1 
















J 




Lr 




L 
































0) 

t- 


















T 




I 


1 






















I 










OFFICE BUILDINGS S 














NUMBER OF CUSTOMERS. 4 I 
TOTAL ANNUAL INCOME 59,70ol-| 
. INCOME PER CUSTOMER (14.910 1 












1- 


INCO 
MAX 
LOAC 

AMO 

ANN 


ME PER K.W.H. . 
MUM K.W. FOR YEAR_ 


_. 

6 7 
.^ 2 
31.6 


60 L 


_r 


1^. 


* 


, 


r^ 


-T 1 


JNT OF DIVERSITY i 
JAL LOAD FACTOR 


40 

o/o 


Lr 1 




























5* 2 4 6 8 10 12 N. 2 4 6 8 W 12 
Fig. 5 



income per customer being $35,800 per year. The income per 
kilowatt-hour, on account of the extraordinary character of 
the load and the large amount of energy bought, is 1.72 cents. 
The maximum kilowatts for the year amounts to 5,280. The 
load at the time of the maximum load on our system, January 
6th, was 4,400 kilowatts, and the amount of diversity was 880 
kilowatts. The annual load factor, that is, the average use 
of our investment for the separate customers, is 31.8 per cent. 
There are 130.8 acres of floor area in these department stores, 
and it cost about 4.4 cents per square foot per year for light 
and power. 



454 



ADDRESSES OF SAMUEL INSULL 



Some 17 public garages contribute information to the 
diagram of Fig. 4. You will notice the income per kilowatt- 
hour is 2.23 cents. The maximum load in kilowatts for the 
year is 2,220, and at the time of our maximum load, on Jan- 
uary 6th, it was only 90 kilowatts. These contracts are taken 
on the basis of our limited-hour or off-peak power rate, con- 
taining a provision that they shall shut off their service at 
the time of our maximum load. The amount of diversity in- 
volved in this service is very large, being 2,130 kilowatts, and 











TV 


PICAL 1 


AXIML 


M LOAI 


DIAGR 


, 








iUU 

m 

200 
100 


300 

200 
100 

! 










"IT 


-i r 


If 


1 






















LJ 


















2 








[ 
















(STEEL. IRON AND BRASS WORK; 
NUMBER OF CUSTOMERS 15 














r 


INCOME PER KILOWATT HOUR 2.020 
MAXIMUM K.W. FOR YEAR 8280 


k 












t 


AMOUNT OF DIVERS TY 2300 










2 




-f 


J 
















n 




2M 


I 


i 6 


k.M. 


8 1 


12 N 2 4 GP.M. 8 10 12 



Fig. 6 

the annual load factor is very low, being 20.4 per cent, but the 
business is very desirable because the demand for it comes at 
other than the times when our investment is needed to the 
greatest extent by the greater number of our customers. It is 
of interest to note that in the 17 garages mentioned there are 
854 electric vehicles charged, at a cost per vehicle of $109 per 
year, or say somewhere about 30 cents a day for "feeding 
the horses," so to speak. 

The ordinary office-building curve of Fig. 5 is not unlike 
a department-store curve. The especially interesting facts 
regarding office buildings are the load diagram, load factor 
and the diversity factor. Office buildings have always been 



CENTRALIZATION OF SUPPLY 



455 



considered the least desirable class of business which it was 
possible for the central-station company to serve. This 
diagram and many others which we have studied show that 
at least a considerable portion of office-building business is 
about as desirable as most other classes of business, as the 
yearly load factor is very good, being 31 .6 per cent. The reason 
for this, of course, is the all-day lighting on the lower floors 
and halls, and the elevator and other motor service. 

The office buildings included in this inquiry have a floor 



1600 
1200 
800 
400 








TYPICAL M/ 


XIMUV 


LOAD 


OIAGF 


5.M 








1600 
1200 
800 
400 


M. 










F 


\ 




f 


1 P- 
























J 




" 








CO 




MANU 

NUMBER 


FACTURERS 

F CUSTOMERS _. 


....... 








(0 


K'ILOWATI 

1 










K.ILOWAT 


INCOME P 
INCOME P 


ER CUSTOMER 








AMOUNT 
ANNUAL L 


F DIVERSITY 
OAD FACTOR . 


. ___- *, ISO 

. 24.0% 














\ 














rj 












1 








*-LT 


-uH~ 


_T^ 


J 












Lo_ 


- U T_ 


^-r 


>M. 2 4 GA.M. 8 1 


12 N. 2 4 6 P.M. 8 10 12 

Fig. 7 



area of 717,000 square feet and the cost of electricity for all 
purposes amount to 5.2 cents per square foot per year. 

Fig. 6 represents steel, iron and brass works. If I had 
been asked, before we had the necessary instruments to indi- 
cate not only the amount of energy consumed but also the time 
at which it is consumed, whether that class of business was 
very desirable, because of its diversity, notwithstanding its 
low load factor, I think my inclination would have been to 
state that I very much doubted whether there was a large 
diversity. You will see, however, that the amount of diversity 
is 2,300 kilowatts, and the annual load factor is 29.6 per cent. 
I had the impression that such manufacturing establishments 



456 



ADDRESSES OF SAMUEL INSULL 



1,<HJU 
1.200 
1,000 
800 
600 
400 
200 

: 




STOCK YARDS 

NUMBER OF CUSTO 
TOTAL ANNUAL INC 
INCOME PER CUSTC 
INCOME PER KILOW 
MAXIMUM K.W. FOR 
LOAD IN K.W 5.3O P 
AMOUNT OF DIVERS 
ANNUAL LOAD FAC1 


AND PACKIN 

MEKS ______ 
OME $6 
>MER $: 


s 

2 

6.2OO 
13, 100 
1.24 
K.W. 
K W. 
K.W. 




n 








1,-WU 
1,200 
1.000 
800 
600 
400 
200 


M 














ATT HOUR 
YEAR 1550 
M. JAN.8-83O 
TY . 72O 


to 


1 n 


J t 






(A 
H 


n 


KILO WAT 








r~ 


JL L 


3 


LTL 




|~L 




KILOWA 1 




J-|_ 


1 


; 












J 


H 










L 


J 


TYPIC 


AL MA 


(IMUM 


LOAD 


DIAQR 


IM 












3 d 


















2M 2 4 6 8 10 12 2 4 6 8 10 12 



Fig. 8 




,2 4 6 8 10 12 N. 2 4 6 8 10 12M, 



Fig. 9 



CENTRALIZATION OF SUPPLY 



457 



probably demanded the greatest amount of energy from us at 
the same time that everybody else was demanding the greatest 
amount of energy. The contrary is the case. It simply 
shows to me I do not know how it appears to the engineers 
who may be present the extreme necessity of knowing all 
you possibly can about your own line of business. The diver- 
sity in that case is very great; it has a relation of 3,280 kilowatts 
to 980 kilowatts, and notwithstanding the low load factor, the 
value of it from every point of view is very great. 



300 

200 
100 


























40U 
300 
200 
100 



1 






TYP 


CAL N 


AXIMUf 

~I_ 


1 LOA( 


OIAG 


1AM 








4_r 


r 


J Lr 






Ll- 








Jk 


r 




<n 








ICE MANUFACTURERS 







o 

s 








INCOME PER CUSTOMER -.-.... $16,300 
































































JM. 2 4 GA.M. 8 10 12 N. 2 4 6 P.M. 8 10 12 



Fig. 10 

A number of different classes of manufacturers are grouped, 
as to electric service, in Fig. 7. They are very much on the 
same general order as the steel, iron and brass works, and show 
a very decided diversity. 

Fig. 8, relating to the stockyards and packing industries 
in Chicago, shows an entirely different class of business, but 
it displays good diversity and an extremely good load factor. 

Electrical energy supplied to five telephone exchanges 
and offices is represented in Fig. 9. The cost of electricity 
per telephone customer or telephone connected amounts to 
about 28 cents per annum. 

The load diagram of ice manufacturers is shown in Fig. 10. 



458 ADDRESSES OF SAMUEL INSULL 



250 
200 
150 
100 
50 


















r 


V 






250 
200 
150 
100 

50 


i. 












r 




*LT 






r~i 












2 


-j 


TYPlCA 


. MAXI 


1UM L 


AO Ol 


GRAM 


^ 


] 










J 


HOI 

NUMBER OF CUSTOMER 


ELS 




L 








J 






CO 


1 








-j 




ANNUAL LOAD FACTOR 




o 
* 




1 






J 














a 


, - 


,J 






















L 


J 







































































12 M. 


2 4 6 8 10 12 N. 2 4 6 8 10 12 1 



Fig. 11 



200 


TYPICA|L MAXJ MUM 




-^ 


I 


1 Q 


JARRIE 










200 
150 
100 



, 


LOAD 


DIAGF 


AMS 






__T| 1 


I 


PL. 










1 P 








1 






L 


J 


















BRICK YARDS AND QUARRIES 

- NUMBER OF CUSTOMERS 










100 








INC( 
"* INCC 
MAX 












ME PER KILOWATT HOUR 1 
MUM K.W.FOR YEAR 


.910 

G50 


so 

1 














AMOUNT OF 


DIVERS TY 


.M 

.0% 

LT 








ANNUAL LOAD FACTOR 2C 

~i n rn n i in 


1 r- 


_rL_ 






















BKICt 


YARDS 








r 




















2*L .2 A 6 8 10 12 N. 2 4 

Fig. 12 


6 8 10 12* 



CENTRALIZATION OF SUPPLY 



459 



The demand here is very satisfactory indeed, except that it is 
extremely low in the winter time. It practically goes off in the 
cold weather. The load factor is very high. The average 
annual load factor is 56.2 per cent, and at the time when the 
maximum demand is made on us for energy the time when 
our plant is taxed to the utmost the amount of energy used 
in ice manufacturing is only one per cent of the maximum de- 
mand for the year in this class of business. 

The same class of information with relation to hotels is 



WJOO 




-i 




TYP 


CAL M 


XIMUf 


LOAI 


DIAQ 


AM 








4000 


.4000 
3000 
2000 


^ 


v 


i 


Pf 


- n 


_P 


& 


IP 


n_ 


~i 


LJl 


in 




u 




[ 






I 


U 








L 


3000 

2000 
1000 


A. 


























f- 






CEMENT WORKS AND 
MISCELLANEOUS 






t 
I 








MAXIMUM K.W. FOR YEAR 6030 














ANNUAL LOAD FACTOR.. 72% 








1 


















































> M . 2 4 CA.M. 8 10 12n. 2 4 6p.m. 8 10 12 

Fig. 13 



shown in Fig. 11. The load factor is very good, but the diver- 
sity is relatively poor as compared with some of the other 
businesses. 

Energy consumption by brick-yards and quarries is shown 
in Fig 12. As I stated before, these industries are discontinued 
in the winter time. 

Another class of business, cement works, as well as miscel- 
laneous operations which use a large amount of energy, present 
the load diagram of Fig. 13. Here there is great diversity 
between the maximum demand of the load of this class of 
business and the demand at the period of our maximum load 
of our entire business. 



460 



ADDRESSES OF SAMUEL INSULL 



Table I gives the summation of the figures given in Figs. 
3 to 13 inclusive. It is a good indication of the average power 
business in any large city. But, as I have stated, there are 

TABLE I. SUMMARY OF LARGE LIGHT-AND-POWER CUSTOMERS 
WITH PRINTING-TAPE WATTMETERS 



No. 
of 
cus- 
tomers 


Kind of business 


Annual income 


Maximum kw. 


Di- 
versity 


Load 
factor 


Amount 


Per 

Kw.-hr. 


For 
year 


5:00 
p.m. 
Jan. 6 


7 
17 
4 
15 

14 
2 
5 

7 
2 
3 
6 


Department Stores 
Garages 


$250,700 
93,400 
59,700 

172,600 
159,000 
66,200 

34,500 
114,300 
27,400 
21,600 

293,900 


1.72c 
2.23c 
2.24c 

2.02c 
2.05c 
1.24c 

2.23c 
1.07c 
1.67c 
1.91c 

0.77c 


5,280 
2,220 
960 

3,280 
3,680 
1,550 

480 
2,170 
340 
650 

6,030 


4,400 
90 
720 

980 
1,550 
830 

380 
20 
260 

540 


880 
2,130 
240 

2,300 
2,130 
720 

100 
2,150 
80 
650 

5,490 


31.8% 
20.4% 
31.6% 

29.6% 
24.0% 
39.2% 

35.6% 
56.2% 
55.0% 
20.0% 

72.0% 


Office Buildings 


Steel, Iron and Brass 
Works 


Manufacturers 
Stockyards and Packing 
Telephone Exchange and 
Offices 
Ice Manufacturers 


Hotels 
Brick-Yards and Quarries 
Cement Works and Mis- 
cellaneous 




82 


$1,293,300 


1.35c 


26,640 


9,770 


16,870 


41.2% 


] 

r 


Diversity Factor 2 


7 



Potal Kw.-hr. sold. . , . .96.077.5C 



only 82 customers included in this and the previous charts on 
that subject. We have about 428 other large customers, who 
give us about $1,500,000 of income a year, so that the power 
business of that character yields us somewhere between $2,500,- 
000 and $3,000,000. 

We are applying the same method of measuring, as rapidly 
as possible, to all our large power customers. Eventually 
we hope to have elaborate tabulations which will show us the 
advantage of one class of business as against another, with the 
relation of the prices charged to earning capacity from our 
point of view of each separate kind of business. 

TABLE II ANNUAL INCOME FROM SALE OF ELECTRICITY 

Per capita Per Kw.-hr. 

Baltimore $4.22 2.72c 

Philadelphia 4.65 3.67c 

New York and Brooklyn 6.37 4.45c 

San Francisco and Vicinity 6.40 1 .97o 

Boston (City and Suburbs) 6.48 5.37o 

Chicago 7.18 2.05o 

Table II shows two interesting features in connection 
with the production and distribution of large amounts of 



CENTRALIZATION OF SUPPLY 



461 



energy. These are the sales per capita and the price per kilo- 
watt-hour. There is some question as to the extent to which 
per capita figures are any real guide to conditions, but the fact 
is that it is almost the invariable rule that where you have a low 
price per kilowatt-hour you have a high income per capita. 
Boston, with its high income per capita, is an exception, as is 









BROOKL1 
BOSTON 


N A 














bJ 


750 
500 
250 
Q 




LOND 


"^ 




AS THE OUTPUT PI 
INCREASES, TH 
FACTOR IMPROV 
THE INCOME (AN 


R CAPITA 
= LOAD 
S AND 
D COST) 
KEASES 












NEW YO 


"\ 


I 


' NIAGAf 


* 

J 


OWL 


\ 






Pt 


BERL 
ILADELP 


!! \ 


1 






1 




1 










\ 


BALTIMO 


^ 






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10 20 30 40 50 60 70 80 90 1C 



ANNUAL LOAD FACTORS 



Fig. 14. Relation of Income to Output 

also Baltimore with a low income per capita owing to its large 
colored population. I happen to have the figures as regards 
gas consumption (Table III), and it is rather interesting to find 
that, although the electrical business is a comparatively new 



TABLE III ANNUAL INCOME FROM SALE OF GAS 
(Exclusive of Street Lighting) 



Baltimore 

Philadelphia 

Brooklyn 

Chicago 



Per capita 
$6.17 
6.21 
6.31 
7.13 



one, we have in Chicago already managed to pass the sales per 
capita of our friends in the gas business. The income from the 
sales of gas per capita is $7.13, and the income from the sales 
of electricity per capita is $7.18. 

Fig. 14 shows that as the output per capita increases, the 
load factor improves and the income (and cost) per kilowatt- 



462 



ADDRESSES OF SAMUEL INSULL 



hour decrease. For instance, the income per kilowatt is very 
high in London, England, the output per capita is very low, and 
the load factor is relatively poor. If I had on this chart a 
cross curve which would follow practically the line of income 
per kilowatt-hour, that is, figuring cost as the total of labor- 
and-material cost, interest and depreciation, you would see 



800 
700 
600 
500 
400 
SCO 
200 
100 





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YEJAR 19J12 


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LOAD FACTOR IMPROVES 
AND THE INCOME 
(AND COST) PER 
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05 10 15 20 25 30 35 40 45 50 55 

ANNUAL CAPACITY LOAD FACTORS (.RATIO OF AVERAGE LOAD TO CAPACITY ) 

Fig. 15. Relation of Income to Output as Shown by 
Census Returns 

that the rule is almost invariable that as the income per kilo- 
watt-hour goes down, as the output per capita goes up, the 
cost per kilowatt-hour follows the line of income and the load 
factor necessarily shows a very decided improvement. 

STATISTICS OF OUTPUT AND INCOME 

It is interesting to note in this chart that the highest output 
per capita is at Niagara Falls, and the lowest income per 
kilowatt-hour is also at Niagara Falls. San Francisco, Min- 
neapolis, and Baltimore are all in the area of hydro-electric 
production, which is supposed to be very much cheaper than 
production from coal. Chicago, with steam production, is 
pretty close to the hydro-electric production, both as to low- 



CENTRALIZATION OF SUPPLY 



463 



ness in income, high point of output per capita, and first-class 
load factor, the last figure being 43 per cent last year. 

For some time we questioned the reliability of these figures 
and of the law that we thought was shown by them, and so we 
looked up the Census figures of the United States Government. 
The Census figures are given for whole states only and, plotted, 
they show as in Fig. 15. As there was not room to print the 
names of all the states on the diagram, a tabulation of all the 
states is given in Table IV. As the maximum demand of the 

TABLE IV. CENSUS RETURNS BY STATES 



Name of state 



Plant rating 
load 
factor 



Output 
percapita 
in Kw.-hr. 



Income 
per Kw.-hr. 



Alabama 22.7 

Arizona 25 .4 

Arkansas 12.4 

California 33 .9 

Colorado 25 . 3 

Connecticut 19 . 2 

Florida 12 . 5 

Georgia 17.8 

Idaho 37 . 

Illinois 29.3 

Indiana 19 .9 

Iowa 14.4 

Kansas 22.0 

Kentucky 15.9 

Louisiana 10 .9 

Maine 22 . 7 

Maryland 5.0 

Massachusetts 17.5 

Michigan 23 . 2 

Minnesota 22 . 7 

Mississippi 14.6 

Missouri 21 .7 

Montana 58 . 

Nebraska 18.6 

Nevada 48.6 

New Hampshire 25 . 

New Jersey 24 .4 

New Mexico 12 .9 

New York 32 . 1 

North Carolina 18.7 

North Dakota 12 .9 

Ohio 18.6 

Oklahoma 19 . 7 

Oregon 20.7 

Pennsylvania 15.7 

Rhode Island 18.4 

South Carolina 30.7 

South Dakota 14 . 

Tennessee 17 .4 

Texas 27 . 6 

Utah 26.0 

Vermont 21.9 

Virginia 8.1 

Washington 14 . 2 

West Virginia 16. 1 

Wisconsin 24 .9 

Wyoming 16 . 1 



22 
161 

11 
734 
206 
117 

34 

33 
355 
205 



79 
33 
11 

158 

21 

115 

187 

90 

16 

71 

1015 

47 

550 

293 

151 

28 

239 

32 

21 

84 

29 

87 

77 

115 

235 

42 

35 

52 

232 

159 

14 

62 

35 

92 

79 



2.49 
3.56 
5.45 
1.59 



10 



5.11 



2.01 
1.37 
2.52 
3.26 
6.45 
2.19 
3.64 
12.25 
1.74 
1.37 
4.17 
2.19 
3.72 
4.02 
4.18 
1.05 
4.98 
1.38 
1.84 
2.85 
5.50 
2.63 
1.90 
7.01 
2.99 



54 



2.39 
4.14 
3.71 
1.24 
4.58 
3.24 
3.38 
1.75 
2.07 
2.65 
4.33 
2.60 
2.92 
6.24 



464 ADDRESSES OF SAMUEL INSULL 

various plants is not given in the Census figures, we had to base 
the load factors on the plant rating instead of the maximum 
demand, but you will find that, relatively, the same rule follows 
as was shown in the case of the cities. The income per kilowatt- 
hour goes down pretty steadily, the output per capita goes up 
pretty steadily, the load factor improves as selling price is 
lowered, and the output per capita goes up as the selling price 
is lowered. 

I think that Fig. 15 and the table are among the most 
interesting which we can produce on this subject of the central- 
ization of energy supply. They show that all the great water- 
power states of the West are in the category of low income per 
kilowatt-hour, high output per capita, and extremely high 
load factor. It is extremely interesting to me to note that in 
a coal state like Illinois, where we have little water-power 
in proportion to the energy consumed, we are located on this 
chart right among the water-power states. New York is 
naturally in that group, because it is brought there by the 
extraordinary conditions at Niagara Falls. 

I think that Fig. 15 is an absolute demonstration of the 
necessity of monopoly in the production and distribution of 
energy. Those of you who are familiar with the business will 
recall the situation in the great water-power states. You will 
remember that in order to utilize the water-powers that have 
so far been brought into use it has been necessary in most cases 
to make installations of great size and requiring large sums of 
money to defray the cost. The territory is sparsely settled; 
the industries are relatively few; and the engineers engaged in 
marketing the product of those expensive water-power plants 
have to take every class of business within their reach. No one 
within the area of a water-power on the Pacific slope of the 
Sierra Nevadas or upon the eastern slope of the Rocky Moun- 
tains would think of producing his own power if a transmission 
line of a water-power company was anywhere within reach, 
partly owing to the high price of fuel in some of the territory, 
and partly to the low price quoted for energy by the majority 
of the large hydro-electric producing companies. The fact 



CENTRALIZATION OF SUPPLY 



465 



is that, whether it is to operate the copper mines of Montana, 
or to drive the trains to cross the mountains farther west to- 
ward the Pacific Coast, the consumers, instead of having their 
own individual plants, go in most cases to the hydro-electric 
companies. 

WHAT HAS BEEN DONE IN THE WEST CAN BE DONE 
IN THE EAST 

That condition has gone on throughout the western water- 
power states for a number of years, simply as a matter of neces- 




1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 
YEARS 

Fig. 16. Diagram Showing Proportion of Motor Load to 
Total Load 

sity. The hydro-electric companies needed the income, and 
they quoted tariffs that would get the business. As a result, 
in most of the territories where hydro-electric plants are oper- 
ated, such a thing as a stationary steam plant is unknown, ex- 
cept under very unusual circumstances. Even on the moun- 
tain grades of the trunk-line railroads it will only be a few years 
before steam power will be unknown to the transportation 
companies. 

It is to produce the same character of concentration of pro- 



466 ADDRESSES OF SAMUEL INSULL 

duction and distribution of energy in the more densely settled 
portions of the United States, in that portion of the states this 
side of the Mississippi River, where coal is relatively cheap and 
yet where it is being used up at such a rate as to jeopard seri- 
ously the natural resources of the country, that I am mainly in- 
terested in talking to you tonight. All that I am trying to 
show you is that the character of business done in California, 
in Idaho, in Nevada, in Montana, and in Colorado, and the 
other water-power states, should be done in the eastern states 
in precisely the same way, where coal is the basis of energy, as 
it is done where water is the basis of energy. 

The comparisons of Fig. 16 are interesting simply as show- 
ing how relatively unimportant is the lighting in connection 
with most of the large electric-service companies in this country 
and in Europe. The diagram shows how the ratio has gone up 
in a period of years. The top line, that of Chicago, shows 
75 per cent; that is the ratio of power (motor load) to the total 

kilowatt-hours sold, and that 
would mean, of course, that light- 
ing represents practically the 
other 25 per cent. Berlin comes 
next, San Francisco next, Phila- 
delphia next, London next, and 
so on down to Boston. 

Fig. 17 is interesting in show- 
ing what becomes of the money 
received by electric-service com- 
panies, which has some bearing 
Fig. 17. What was Done with the on the cost of our product and 
Dollar of Income in Chicago in our se lli n g price. This chart 

represents the operations of a 

company which has an income of about $17,000,000 a year. 
You will notice that one-half of the cost is that of labor, fuel, 
materials, supplies, and miscellaneous expenses. Taxes and 
municipal compensation amount to 7 per cent. To the layman 
the fact that the fuel costs only 11 per cent while the right to 
do business takes 7 per cent may seem to be somewhat unusual. 




CENTRALIZATION OF SUPPLY 



467 



You will notice that one-half of all the expense represents 
the cost of money and the right to do business. Thus, 11 cents 
out of every dollar goes for depreciation; 9 cents out of every 
dollar received goes for interest on bonds; 15 cents per dollar 
of income is paid out as dividends on capital stock. The two 
together represent about 6 per cent on the money invested in 

840,000,000 



$80,000.000 



$40.000.000 



DIAGRAM SHOWING 

RELATIVE GROWTH IN INVESTMENT AND 
IN ELECTRICITY SOLD IN KILOWATT HOURS 
YEARS 1896 TO 1913 



KILOWATT HOURS SOLD W/A 
DOLLARS Of INVESTMENT I 




720,000,000 



600,000.000 



480,000,000 



360,000.000 



240,000,000 
t 



120,000,000 



1897 1899 1901 1903 1905 1907 1909 1911 1913 
YEARS 

Fig. 18. Ratio of Investment to Output in 
Chicago 

the property. Seven per cent surplus is set aside, partly from 
the work of the selling engineer in improving earning capacity 
on the money invested. 

Relative growth in investment and in electricity sold in 
kilowatt-hours for the years 1896 to 1913 is shown in Fig. 18. 
The solid vertical lines represent dollars, and the shaded por- 
tions represent the kilowatt-hours sold. I do not know that I 
can better tell the story of the concentration of power supply 



468 



ADDRESSES OF SAMUEL INSULL 



than that chart does. In 1903 the kilowatt-hours sold was 
somewhere about 60,000,000, and you go on to 1913 and the 
number of kilowatt-hours sold is nearly 840,000,000. I would 
call that change the saturation of the dollar. It shows what 
can be done by concentrating production for all purposes, and 
as a result improving the diversity factor and improving the 
load factor. 

Generally the additions to plant provided out of reserves 
amount to the proportion of about three dollars for every two 









































S 




































X" 












DIAGRAM 

WING EARNINGS PROM 
ALE OF ELECTRICITY 
PER CAPITA 
r'EARS 1895 TO 1913 












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97 18 


99 19 


01 '19 


33 .is 


36. 19 


0.7 19< 


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LL 19 


3 



YEARS 
Fig. 19. Per Capita Sales in Chicago 

dollars that is supplied from new capital. That gives you some 
idea of the stability of the investment. 1 

In Fig. 19 are shown the earnings from the sale of electricity 
per capita for the years 1895 to 1913. It follows practically, 
and must necessarily follow, the curve (Fig. 18) which shows 
the relation of investment to output. 

Fig. 20 should be of interest to everybody, whether he 
uses electricity or not. One of the great, vital questions before 
us is the question of the conservation of our natural resources. 

1. Mr. Insult's point here is shown in Fig. 6 of chapter on "Electrical 
Securities," page 435. 



CENTRALIZATION OF SUPPLY 



469 



These curves give the pounds of coal burned by this electric- 
service company per kilowatt-hour, the kilowatt-hours gener- 
ated and the number of tons of coal burned. As the years 
have gone by, from 1900 to 1913, we have dropped from nearly 
seven pounds of coal per kilowatt-hour to 2.87 pounds. As a 
result, notwithstanding the great increase in our output, the 
tons of coal burned do not increase in any such proportion. 
That tendency is going on continuously, partly from the work 
of the inventor, partly from the work of the designing engineer, 
and partly from the work of the selling engineer in improving 



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.1901 1902 1903 1904 1905 1906 1901 1908 1909 1910 1911 1912 
YEARS 

Fig. 20 

the character of our load. In my judgment, in the next few 
years, the pounds of coal per kilowatt-hour will drop something 
like twenty -five to thirty-five per cent, which necessarily must 
have an important bearing upon the value of water-powers, 
especially in territory where water-powers have low head, and 
consequently have relatively high investment in proportion 
to their product. 

Fig. 21 is really a balance sheet. It is taking the figures 
from annual balance sheets and plotting them as curves. It 
is the index as to whether the business of supplying energy is 
run economically. You will notice that notwithstanding that 
the income per kilowatt-hour sold goes down very steadily 



470 



ADDRESSES OF SAMUEL INSULL 



in the course of five years, the income per dollar of investment 
goes up steadily. During the same time, the cost per kilowatt- 
hour sold goes very steadily down, dropping practically one 
cent, and follows the line of income. That cost includes oper- 
ating expenses, interest and depreciation. The "net earnings 
per dollar of investment" line goes steadily up. 

105 




.1908 



1910 1911 

YEARS 

Fig. 21 



1912 



1913 



SOME OF THE PRACTICAL BENEFITS OF CONCENTRATION 

In the previous charts I have given you some of the results 
of the centralization of energy production and distribution 
in a large center of population. As I stated at the beginning, 
I have naturally taken the figures of the company in Chicago 
of which I am the head. They were the most available for 
my purpose, and I naturally am able to make such use of them 
as seems necessary, which I might not feel at liberty to do with 
the figures relating to companies managed by some of my friends. 

Purposely I kept the transportation business out of any 
of the charts that I present to you this evening. We generate 
in Chicago nearly one thousand million units (kilowatt-hours), 



CENTRALIZATION OF SUPPLY 471 

and a little over one-half of our annual product is sold to the 
local transportation companies. Except so far as the produc- 
tion of that energy has a bearing upon our total cost and our 
total income, and our income per dollar of investment, I have 
refrained from discussing the income from transportation, or 
the output on account of transportation. 

I wanted to show you how it was possible to get a large 
diversity of business, having an extremely good load factor, in 
territory where, for one reason or another, it does not seem pos- 
sible to combine all the production of energy for all classes of 
business. I might follow the subject still further, and show 
you the advantages alike to the transportation companies and 
to the energy-producing companies, and to the community itself 
in massing all classes of business, as I stated in my opening 
remarks it was necessary to do if you desire to get the highest 
possible efficiency in production and the highest possible effi- 
ciency in earning capacity on the money invested. 

[Mr. Insull here repeated some of the data and estimates in 
relation to concentration of energy supply in the state of 
Illinois, as given in his Franklin Institute address, which is be- 
gun, in this volume, on page 357.] 

Fig. 22 shows the territory in Illinois which I have the priv- 
ilege of operating. This territory extends from the Mississippi 
River on the west almost to Terre Haute, Indiana, on the east. 
The method of distribution is to place the generating stations 
in centers where there is relatively a large amount of energy 
required, or where the energy can be produced very cheaply. 
For instance, there were originally in this whole territory 63 
stations; we now have but 30, and expect ultimately to have 
only seven or eight. The main centers of supply are at Mat- 
toon, at Kincaid at the mouth of the coal mines, at Beardstown, 
at Belvidere, and several other places, and in addition we take 
energy from the Keokuk hydro-electric plant on the Mississippi 
River. 

This is probably as good an illustration as I can present to 
you of the group operation of properties, typifying the produc- 
tion and distribution on the basis of concentration. There 



472 



ADDRESSES OF SAMUEL INSULL 



LEGEND 

GENERATING STATION 

O TOWNS SERVED 

TRANSMISSION LINES 

PROPOSED 
INTERURBAN RY. SERVICE 




ILLINOIS 

TOWNS WITH 24 HOUR 

ELECTRIC SERVICE 

j=ROM 

Public Service Co. of Northern Illinois 
Illinois Northern Utilities Co. 
Central Illinois Public Service Co-.. 
Tri-County Light & Power Co. 
Central Illinois Utilities Co. 



Fig. 22. Map of Illinois, Illustrating Group Operation of Public-Utility 
Properties (1914) 



CENTRALIZATION OF SUPPLY 473 

are some other properties, of which I have not the figures, 
operated in groups, centered at Peoria and Springfield, and some 
other groups in different parts of the territory that are owned 
by other people. 

Even in so densely settled a state as Illinois, having such 
marvelous wealth above ground and below ground, the energy 
supply is confined to 48 per cent of the population. The popu- 
lation that I am particularly interested in at this time is the 
other 52 per cent. 

MONOPOLY, REGULATION, FAIR TREATMENT ON BOTH 
SIDES THESE ARE ESSENTIAL 

This must be a monopoly business, if it is to be run on 
economic principles. The sound economics of it are those of 
monopoly, and, as I have said, it is an unreasonable thing to 
expect that the community, whether it be the local community, 
or the state or the nation, should allow business of this character 
to go on without being regulated; but, assuming that the regu- 
lation is intelligent, the investor has nothing to fear, the user 
has nothing to fear. If companies operating over large areas 
have not the good judgment to run their business in such a 
way as to square with public opinion, the commissions that 
exist throughout most of the states today are ready to pro- 
tect the users of the product. If the communities are so ill- 
advised as to be guilty of unfairness to those who put their 
money into these properties, the commissions are there to 
protect the investor. 

My own judgment is that the very best thing that has hap- 
pened to our industry it is an inconvenience to men like 
myself, dealing with a large number of properties in various 
parts of the country but the very best thing that has hap- 
pened to our industry as a whole within the last few years has 
been the creation of commissions to regulate the electric gener- 
ating and distribution business and kindred interests. 

I believe that, in the long run, regulation means protection. 
I know to a great many people that does not seem to be a very 



474 ADDRESSES OF SAMUEL INSULL 

popular side of things at this time, in view of the treatment, or 
the alleged treatment, the railroads are receiving at the hands 
of the Interstate Commerce Commission; but I have a firm 
conviction that the best thing for our securities, the best 
thing for the widows and orphans who buy them, and the best 
thing for us, is that we should stand firmly on the basis that 
our business must be a monopoly. We should recognize the 
fact, if it is a monopoly, that it should be regulated, and then 
we should insist on getting fair treatment, and in order to get 
fair treatment we must be fair to those with whom we are 
dealing. 

In my judgment, within the next few years there will 
scarcely be a spot in the densely settled portions of the country, 
and especially between here and, say, the central portion of the 
Mississippi Valley, where you will be unable to get electric 
service for all purposes at all times from a central system of 
generation and distribution. 

I think it was my friend Dr. Steinmetz who, in a recent 
lecture, drew a picture of the transmission lines of the future 
running across the country something like the trunk lines of our 
transportation systems. 

We are engaged in a business that probably has a more 
intimate relation to more classes of people and to greater num- 
bers in the community than any other line of public service, 
governmental or private. 

There is no reason whatever why the wheels of industry, 
the avenues of transportation, the homes of the poorest, and 
all other classes of human endeavor should not add to the great- 
ness of the business of the generation and distribution of elec- 
trical energy. 

Sometimes we hear (as we heard a representative from my 
own state recently in the halls of Congress) someone decry the 
fact that there is no competition in a business where the price 
is fixed by a body appointed under an act of the Legislature 
by the governor of the state a business which cannot be 
run economically except as a monopoly. Remarks of that 
kind cannot possibly be made by anyone understanding the 



CENTRALIZATION OF SUPPLY 475 

true economics of the situation. I think that much can be 
done in the direction of the conservation of resources, in les- 
sening the severe conditions of labor, in improving the condi- 
tions of our people by opening up our rural districts to manu- 
facturers, where there is any considerable density of population; 
in fact, there is scarcely a direction in which one can look 
without seeing possibilities of development in connection with 
what is really the juvenile industry in public service and yet 
the greatest industry in public service today. 

I am not speaking to an audience of engineers only, but to 
an audience with a strong sprinkling of young men, to those 
who form the great body who have the destinies of this country 
in their hands. There is no blow that you can deal to your 
motherland, there is no greater injury that you can do to your- 
selves, than to deal unfairly with the great public-service 
enterprises that have built up this wonderful republic. I 
think that if nothing else is accomplished by my friends and 
myself, in appearing before you, than to give you a better 
conception of what the leaders in the industry are after than 
you ordinarily receive from reading the flippant remarks in the 
average daily newspaper, we will have rendered you as well as 
ourselves a great service. 



INDEX 



Abbott, W. L., 164. 

Accounting, Uniform, 4. 

Acrimonious Discussion of the Early 
Days, 60. 

Adams Street Generating Station, 
Chicago, 21, 112, 177, 319, 350. 

Administrative County of London 
Bill, 218. 

Advancement, Opportunity for (Com- 
pany-Section Meeting, 1911), 234. 

Advertising, Newspaper, Value of, 
116, 168. 

Allgemeine Electricity Company, 136, 
355. 

Alternating-Current System for Elec- 
tric Lighting, Introduction of, 21, 
24, 50, 111, 118, 148, 176, 350. 

Alternating-Direct-Current Combina- 
tion, 22. 

Aluminum Arresters, De Ferranti's 
Work on (Steinmetz), 230. 

American Institute of Electrical En- 
gineers, Edison Medal Presenta- 
tion at 1910 Annual Dinner of, 
123. 

American Institute of Electrical En- 
gineers, Railroad Electrification 
Address before, 255, 308. 

American Institute of Electrical En- 
gineers, Speech at Dinner During 
the Chicago 1911 Convention of, 
206. 

American People, Adaptability of, 
114. 

Apartments, Residence. (See Di- 
versity, Flats and Residence.) 

Appleton, Wis., Generating Station, 
20 (n.), 109, 147, 174, 319. 

Appraisal of Public-Utility Proper- 
ties, Necessity of the (Discussion at 
New York 1911 N. E. L. A. Con- 
vention), 197. 

Arc Lamp. (See Lamp.) 

Armington & Sims Engines in Early 
Edison Stations, 19, 319, 320. 



Arnold, Bion J., 66, 69, 309. 
Association of Edison Illuminating 

Companies at Briarcliff, Speech 

before (1909), 73. 
Association of Edison Illuminating 

Companies, Formation of, 2. 
Association of Edison Illuminating 

Companies, Presidential Address 

of 1897 before, 1. 
Association Island Speech (1913), 

414. 
Automobile, Electric. (See Garages 

and Vehicle.) 

Baker, Alfred L., 244. 
Baker, Frank J., 111. 
Balance Sheet Figures Plotted as 

Curves, 469. 
Baltimore Central-Station Statistics, 

460, 462. 

Bankers Should Not Oppose Regula- 
tion of Utilities, 441. 
Batchelor, Charles, xxvii, 110. 
Bell, Alexander Graham, Inventor of 

the Telephone, 105, 125, 393. 
Berlin Central-Station Work, 22, 

116, 350, 447 (n.), 466. 
Berlin, Early Electric Railway in, 

110. 
Bills, Electric-Light, of 1892 and 1912, 

326. 

Bird, Paul, 294. 
Boilers at Pearl Street Station, 18, 

319. 

Bonds of Holding Companies, 440. 
Bonds. (See also Prior Lien and 

Securities.) 
Boston, Atlantic Avenue Station in, 

22. 
Boston and Chicago Load Diagrams 

Compared, 282. 
Boston, Diversity of Demand in, 

265, 266, 277. 
Boston, Edison Electric Illuminating 

Company of, 141, 266, 277- 



477 



478 



INDEX 



Boston, First Central Station in, 
21, 349. 

Boston Load Factors, Daily, 277, 
278, 280. 

Boston Speech at General Electric 
Company's Dinner, 127. 

Boston and Suburbs, Annual Income 
in, from Sale of Electricity, 460. 

Brains in Control, 246, 335, 336, 
397. 

Brass, Iron and Steel Works, Elec- 
trical Requirements for, 452, 455. 

Brewster, E. L., 316. 

Briarcliff Speech of 1909 before 
Edison Association, 73. 

Briarcliff Speech, Suppression of, 
91 (n.). 

Brickyards and Quarries, Electrical 
Requirements of, 451, 459. 

Brighton, Arthur Wright's Work at, 
217, 351. 

Brooklyn, Central-Station Work in, 
24, 261, 350, 353. 

Brooklyn Speech (1912), 342. 

Brown, Charles E., 103 (n.). 

Brush, Charles F., 107, 393. 

Brush Electric Company, 50. 

Buffalo, Possibilities of a Steam- 
Electric Plant in, 202. 

Bunnell (J. H.) & Company, 106. 

Byllesby Conventions and Dinners, 
Speeches at, 116, 118, 167, 174, 
206, 249. 

Byllesby, H. M., 118, 174, 241. 

By-Product of the Electric-Service 
Business, Electric Lighting to Be- 
come a, 416. 

Cables. (See Submarine and Under- 
ground.) 
Canadian Electric-Service Problems 

Discussed on Coronation Day 

(Canadian Electrical Association, 

1911), 199. 
Candle-Hour Diagram Showing Lamp 

Efficiency and Decrease in Rates, 

431. 
Canvasser's Productivity Increased 

by Advertising, 168. 
Capital Account, Conservatism in 

Charging to, 436. 
Capital Always Gets Its Pay, 207, 

244. 
Capital, Annual Turnover of, in 

Public-Utility Businesses, 127, 197. 



Capital and Labor Paid about Equal- 
ly Out of Central-Station Earnings, 
164. 

Capital, Large Aggregations of, in 
Corporate Form, 44. 

Capital, Sources of, for Plant Ad- 
ditions in Chicago, 435, 468. 

Capitalists, Confidence of, in Amer- 
ican Inventors, 114. 

Captains of Industry, Prejudice of, 
446. 

Carlton, W. G. (Electrification), 313. 

Cement Works and Others, Electrical 
Requirements of, 459. 

Census Returns by States on Load 
Factor, Income and Output, 463. 

Centralization of Energy Supply 
(Y. M. C. A. Speech in New York, 
1914), 445. 

Centralization versus Municipaliza- 
tion, 384, 412. 

Central-Station Business, Possibil- 
ities of the (1907), 48. 

Central-Station Commercial Devel- 
opment, Twenty-Five Years of 
(St. Louis N. E. L. A. Address 
of 1910), 144. 

Central-Station Company, Real Func- 
tion of a, 152, 207, 257, 355, 400, 
417. 

Central-Station Companies (1897), 1. 

Central Station, Development of 
the (Purdue University Lecture 
of 1898), 8. 

Central-Station Development through 
Three Decades, Stepping Stones of 
(Brooklyn Speech of 1912), 342. 

Central-Station Economics. (See 
Competition, Economics, Enter- 
priser, Massing, Monopoly, Rates, 
Regulation, Sociological, Welfare 
Work, etc.) 

Central-Station, Enlarging the Field 
of the, 136, 207. 355, 400, 412, 
419, 439. 

Central-Station Generation, The Re- 
lation of, to Railroad Electrifica- 
tion (A. I. E. E. Address, 1912), 
255. 

Central-Station Industry, Edison the 
Inventor of the, 333. 

Central-Station Industry, Invest- 
ment in. (See Investment.) 

Central-Station Output on a Square- 
Mile Basis, xxxvii, 400. 



INDEX 



479 



Central-Station Statistics (United 
States), 114, 146, 180, 349. 

Central Station. (See also many 
other entries, as Advertising, Al- 
ternating, Boilers, Commonwealth, 
Cost, Distribution, Diversity, Ed- 
ison, Electric, Employees, Engines, 
Fisk Street, Franchises, Harrison 
Street, Income, Interest, Invest- 
ment, Lamp, Load, Massing, Mo- 
nopoly, National Electric Light As- 
sociation, Pearl Street, Plant, 
Price, Profits, Public, Railroad, 
Railway, Rates, Regulation, Secu- 
rities, Sociological, Transmission, 
Turbo-Generators, Wiring, etc.) 

Cheap Electricity, Advantages of, 
97, 100, 339, 380, 390, 395, 403, 425. 

Cheap Money and Low Rates, 245. 

Cheap, Why Electrical Energy is, 
in Chicago, 66, 69, 309, 410. 

Cheever, Charles, 105. 

Chicago, Annual Income in, from 
Sale of Electricity, 460. 

Chicago and Boston Load Diagrams 
Compared, 282. 

Chicago, Central-Station Anniversary 
Celebration in, A Quarter-Century 
(Company-Section Meeting, 1912), 
316. 

Chicago, Central-Station Output of, 
Greater than That of New York 
and Boston Combined, 332, 411. 

Chicago City Railway Company, 
City Club Discussion (1908) of 
the 21,000-Kilowatt Contract with, 
65. 

Chicago, Commonwealth Edison Com- 
pany of. (See Commonwealth.) 

Chicago, Diversity of Demand in, 
85, 131, 211, 266, 272, 277, 338, 
448. 

Chicago, Early Electric Railway in, 
110. 

Chicago Edison Company, Mr. Insull 
Becomes President of, 1 (n.), 316. 

Chicago Edison Company, Organiza- 
tion of the, 21, 51, 112, 317. 

Chicago Electric-Service Statistics 
Compared with Those of Three 
Hundred Central-Station Under- 
takings in Great Britain, 419. 

Chicago, Electrical Energy in, Pro- 
duction and Sale of (Electric 
Club Speech of 1909), 97. 



Chicago Engineers' Club Speech 
(1911), 182. 

Chicago Generating Stations. (See 
Adams Street, Fisk Street, Har- 
rison Street, Northwest, Quarry 
Street, etc.) 

Chicago, Income Per Capita in, 460, 
468. 

Chicago Load Factors, Daily, 274, 
275, 276, 277, 278. 

Chicago and London, Electric-Service 
Conditions in, Compared. (See 
London.) 

Chicago Maximum-Load Statistics. 
(See Maximum Load.) 

Chicago, Motor Load in, 466. 

Chicago N. E. L. A. Convention of 
1898, Presidential Address at, 34. 

Chicago N. E. L. A. Convention of 
1913, Address at, 405. 

Chicago and New York Load Dia- 
grams Compared, 280, 281, 330, 
434. 

Chicago and New York as Power 
Production Centers, 201. 

Chicago Public Utilities, Annual 
Income (1911) of, 329. 

Chicago Public Utilities, Investment 
in, 113, 186, 243. 

Chicago Railroad Terminals, Pro- 
posed Electrification of, 282, 283, 
284, 285, 286. 

Chicago, Rates for Railway Elec- 
tricity Supply in. (See Railway.) 

Chicago Record-Herald, Quotation 
from, 187. 

Chicago Steam Railroads Electrified, 
Electric Power Requirements of 
(Appendix to A. I. E. E. paper of 
1912), 294. 

Chicago Traction Ordinances, Finan- 
cial Aspects of, 76, 120. 

Chicago World's Fair (1893), 112, 
352. 

Citizens, Duties of, to Public-Service 
Industries, 185. 

City Club of Chicago, Speeches be- 
fore, 54, 67, 338. 

Clamor and Guesswork Do Not 
Promote Industry, 187. 

Clark, Walton, 357 (n.). 

Coal, Central-Station Reserves of, 
331. 

Coal May Become a Curiosity (Edi- 
son), 251. 



480 



INDEX 



Coal Mining, Diversity in, 377. 

Coal Mining in Illinois, Electrical 
Requirements for, 376. 

Coal. (See also Fuel.) 

Coffin, C. A., 137, 309, 354, 355. 

Cold Weather and Railway Load, 
131, 264, 270, 289. 

Collateral Trusts, 440. 

Combinations, Electric-Service, The 
Logic of, 135, 412. 

Combinations. (See also Massing 
of Production and Monopoly.) 

Commercial Club Speech (Chicago, 
1911), 243. 

Commercial Engineering. (See Sell- 
ing Engineering.) 

Commercial Side of the Business, 
Importance of the, 151, 351, 435. 

Commission Control. (See Public- 
Utility Commissions.) 

Commonwealth Edison Company 
Developed by the Brains within the 
Organization, 335. 

Commonwealth Edison Company, 
Earnings of. Distribution of, 329, 
466. 

Commonwealth Edison Company, 
Equipment and Statistics of, 66, 98, 
121, 162, 253, 309, 321, 326, 401, 
410, 411, 417, 419, 420, 428, 429, 
435, 437, 460, 466, 467, 468, 469, 470. 

Commonwealth Edison Company, 
Financial Chart of, 470. 

Commonwealth Edison Company, 
Formation of, 54 (n.). 

Commonwealth Edison Company, 
Generating Stations of, Total 
Rating of, 411, 420. 

Commonwealth Edison Company, 
Kilowatt-Hour Output of, 74, 116, 
162, 332, 411, 420, 429, 438, 467. 

Commonwealth Edison Company, 
Load Factors of, 82, 83, 163, 268, 
271, 277, 280, 324, 331, 420. 

Commonwealth Edison Company, 
Maximum-Load Statistics of. (See 
Maximum Load) . 

Commonwealth Edison Company, 
Quarter-Century Anniversary Cele- 
bration of, 316. 

Commonwealth Edison Company, 
Rates of. (See Rates.) 

Commonwealth Edison Company and 
the Sanitary District of Chicago, 
61, 340. 



Commonwealth Edison Company 

Section of the National Electric 

Light Association, Speeches before, 

158, 234, 241, 316, 399. 
Commonwealth Edison Company, 

Welfare Work of. (See Pension 

Fund and Savings Fund.) 
Company-Section Organization of 

N. E. L. A., 144, 159, 189, 234, 337. 
Company-Section Organization, Value 

of, in the National Electric Light 

Association (Speech at New York 

1911 Convention), 189. 
Competition Not the True Regula- 
tive Force, 44, 155, 206, 399, 442, 

474. 
Concentration of Production. (See 

Massing of Production.) 
Conservation of Natural Resources, 

213, 247, 257, 293, 401, 408, 411, 

447, 466, 468, 475. 
Conservatism in Charging to Capital 

Account, 436. 
Construction, The Engineering of, 

428, 434, 469. 
Contract, Chicago Railway. (See 

Railway Electricity Supply.) 
Cooke, Conrad, on Subdividing the 

Electric Light, 11. 

Cooke, W. F., and the Telegraph, 392. 
Cooper, Peter, 125. 
Co-operation Conference of 1913 on 

Association Island, 414 (n.). 
Country Districts, Boon of Cheap 

Electricity in, 380, 390, 395, 396, 

402, 425, 440, 475. 

Copper, Capital in the Form of, 424. 
Corporations, Hostility toward, 157, 

243. 

Corporations, Industrial. (See In- 
dustrial.) 
Cos Cob Generating Station of New 

York, New Haven and Hartford 

Railroad, 291. 
Cost of Electric Lighting Decreased 

While Cost of Other Commodities 

Increased, 55. 
Cost of Electrical Energy in Lake 

County District, 365. 
Cost of Electricity, Interest on In- 
vestment the Greatest Item in. 

(See Interest on Investment.) 
Cost and Price of Central-Station 

Electrical Energy, 170, 411, 438, 

470. 



INDEX 



481 



Cost of Production, Analysis of the, 

77. 
Cost, Relative, of Electric-Lighting 

Supply, 59. 
Cost of Service and Welfare Work, 

194. 
Cost, Supplying Electricity below, as 

a Matter of Public Policy (Walter 

L. Fisher), 62. 
Cost System of Rates (N. E. L. A. 

Presidential Address of 1898), 

34, 39. 
Cost Per Unit of Output, Constant 

Reduction in, 30, 438, 470. 
Credit Association, When a, Was 

Needed, 111. 
Criticism with Little Knowledge, 

447. 

Crompton, R. E., 13. 
Curtis Steam Turbine, 354. 
Customers, Commonwealth Edison 

Company's, Number of, 162, 184, 

329, 437. 
Customers, Friendly Relations with, 

156, 179. 

Dawes, Charles G., 119, 206. 

Daylight Work of Central Stations 
(1897), 146. 

Day Load in Farming District, 363. 

De Ferranti, S. Z., and Others, Din- 
ner in Honor of (1911), 215. 

De Ferranti, S. Z., Speech of, at New 
York Dinner (1911), 219. 

De Ferranti, S. Z., Work of, 180, 216, 
229 (Steinmetz), 256, 325. 

De Laval Steam Turbine, 354. 

Demagogue, Cry of the, 336. 

De Muralt, C. L. (Electrification), 
314. 

Department Stores, Electrical Re- 
quirements of, 452, 453. 

Depreciation and Interest, Impor- 
tance of, 194, 421, 434, 466. 

Deptford Generating Station. (See 
London.) 

Destruction Department, xxxii, 349. 

Direct-Alternating-Current Combi- 
nation, 22. 

Direct Coupling of Engine and Dyna- 
mo, Edison's Early Use of, 20, 108, 
174, 319. 

Direct-Current Network, 24. 

Discounts in Rate Systems, 28, 40, 
149. 



Distribution of Electrical Energy, 
Present and Future (Association 
Island Speech of 1913), 414. 

Distribution Expense Much Greater 
than Generating Expense, 202, 211. 

Distribution System, Edison, 6, 9, 
16, 33, 49, 251, 333, 393. 

Distribution System, Edison. (See 
also Three- Wire.) 

Distribution System, Improvement 
of, 178. 

Distribution Systems, Diversity Fac- 
tor in, 211. 

Distribution. (See also Massing of 
Production.) 

Diversity of Demand in Cities. (See 
Boston, Chicago, New York, etc.) 

Diversity of Demand as Illustrated 
by a Block of Apartments in 
Chicago, 272, 448. 

Diversity of Demand of Large Cus- 
tomers, 449, 450. 

Diversity of Demand in the State of 
Illinois, 378, 381, 401, 423. 

Diversity Factor in Engineering 
Talent, Utilization of (Steinmetz), 
309. 

Diversity Factor, Various References 
to, 79, 85, 128, 153, 208, 257, 260, 
265, 267, 272, 274, 281, 338, 378, 
400, 434, 439, 447, 468. 

Diversity Factor. (See also Load 
Factor.) 

Doherty, H. L., 189. 

Dollar Invested, Saturation of the, 
with the Electrical Energy Pro- 
duced, 437, 468. 

Dollar, One, Would Buy, Amount of 
Electric Light, 326, 431. 

Dollar Point of View, The, 348. 

Drainage as a Central-Station Load, 
370. 

Drexel, Morgan & Co., 175. 

Drug Store Rates for Electricity, 433. 

Dry Goods Stores, Large, as Central- 
Station Customers, 27. 

Dunn, Gano, 255 (n.). 

Dunne, Mayor, and Chicago Electric- 
Service Rates, 54, 340. 

Duplication, Bad Results of, 184. 

Duplication of Production is Eco- 
nomic Waste (Speech at Byllesby 
Dinner to Engineers, 1911), 206. 

Dynamo-Electric Machines, Wal- 
lace's Experiments on, 15. 



482 



INDEX 



Dynamo Unit, Jumbo. (See Jumbo.) 
Dynamos, Early Edison, 318, 319. 

Earnings, Central-Station, Dis- 
tribution of, in Chicago, 329, 466. 

Economic Basis of Electric-Service 
Monopoly, 445. 

Economic Lines, Regulation Should 
be on, 188. 

Economic Necessity, Massing of 
Energy Production an (Boston 
Speech of 1910 at General Electric 
Company's Dinner), 127. 

Economic Questions, Employees 
Urged to Study (Company-Section 
Meeting, 1910), 158. 

Economic Waste, Duplication of 
Production Is (Speech at Byllesby 
Dinner to Engineers, 1911), 206. 

Economics, Central-Station, Learn- 
ing, by Experience, 399, 438. 

Economics, Central-Station. (See 
also Competition, Enterpriser, 
Massing of Production, Monopoly, 
Rates, Regulation, Sociological, 
Welfare Work, etc.) 

Economics of Railroad Electrifica- 
tion, 256, 292, 311, 380, 402. 

Economy Light and Power Company, 
136 (n.). 

Edgar, Charles L., 5, 141. 

Edison (Thomas A.), Advice of, to 
Young Men, 252. 

Edison, Aphorisms of, 251. 

Edison, Application of, in 1880 for 
Electrical-Distribution Patent, 9. 

Edison Association. (See Associa- 
tion of Edison Illuminating Com- 
panies.) 

Edison, Birth and Parentage of, 333. 

Edison in Boyhood and Youth, 
Anecdotes of, 334. 

Edison, Business Methods of, in the 
Eighties, xxix, xxxii. 

Edison, Career of, Lessons from the, 
333. 

Edison Central-Station Companies in 
1897, Problems of the (Edison As- 
sociation Presidential Address), 1. 

Edison Distribution System. (See 
Distribution and Three- Wire.) 

Edison, Early Use of Direct Coupling 
of Engine and Dynamo by, 20, 
108, 174, 319. 

Edison, Early Work with, xxv. 



Edison Electric Light Company, The 
Old, and Its New York Head- 
quarters, xxvii, 317, 344. 

Edison Electric-Lighting System, 
xxix, xxxvii, 7, 9, 13, 48, 107, 125, 
147, 250, 317, 333, 342. 

Edison Electric Railway, 49, 111, 330. 

Edison as an Engineer, 251, 333, 348. 

Edison General Electric Company, 
xxxi (n.), 1 (n.), 6. 

Edison (Thomas A.) and Insull 
(Samuel), Relations of, xv, xx, 
xxvi, xxxvi, 48, 103, 108, 118, 249, 
318, 334, 344. 

Edison the Inventor of the Central- 
Station Industry, 333. 

Edison Machine Works in Goerck 
Street, New York, xxx, xxxviii, 
318, 344. 

Edison Medal, Presentation of the, 
to Elihu Thomson, 123. 

Edison, The Name of, a Talisman 
(Byllesby Dinner, 1912), 249. 

Edison, Personal Appearance of, in 
1881, xxviii. 

Edison Risked His Private Fortune, 
346. 

Edison Sends Quarter-Century Greet- 
ing to Chicago, 317. 

Edison and Swan as Inventors, xxxviii, 
11. 

Edison, Three-Wire System of. (See 
Three- Wire.) 

Edison Tubes of the Early Days, 
xxxi, 18, 50, 344, 345. 

Edison, Work of, Value of the, xvi, 
xxvii, xxix, xxxii, 7, 13, 19, 109, 
216, 250, 333, 343, 393, 416, 432. 

Edison's Youthful Private Secretary, 
An Intimate Personal Opinion of 
the Prospects of the Electric Light 
in 1881 from, xxxv. 

Efficiency, Savings of, Go to Cus- 
tomers, 193. 

Electric Club of Chicago, Speech of 
1909 before, 97. 

Electric Light, Amount of, One 
Dollar Would Buy, 326, 431. 

Electric Light hi 1881, Prospects of, 
xxxv. 

Electric Light, Subdividing the, 10, 
11, 48, 107. 

Electric Lighting to Become as a 
By-Product of the Electric-Service 
Business, 415, 420. 



INDEX 



483 



Electric Lighting, The Beginnings in, 
107, 111, 125, 220 (De Ferranti), 
318, 342, 344. 

Electric Lighting, Cost of, Compared 
with Cost of Other Commodities, 
55. 

Electric Lighting (Incandescent), 
Proportion of, to Total Central- 
Station Load, 417. 

Electric Lighting. (See also Central 
Station, Edison, Lamp, Monopoly 
Rates, Regulation, etc.) 

Electric Meter. (See Meter.) 

Electric Motor. (See Motor.) 

Electric Pen, xxxvi. 

Electric-Service Business, Electric 
Lighting to Become as a By-Prod- 
uct of the, 415, 420. 

Electric Service. (See also Central 
Station, Diversity, Massing of 
Production, Monopoly, Sociologi- 
cal, etc.) 

Electric Railway. (See Railway.) 

Electric Vehicle. (See Garages and 
Vehicle.) 

Electrical Development, Thirty 
Years of (Electrical Trades As- 
sociation Speech, 1909), 103. 

Electrical Energy, Distribution of, 
Present and Future (Association 
Island Speech of 1913), 414. 

Electrical-Energy Era, The, 391, 
412, 425, 474. 

Electrical Energy Produced Direct 
from Coal Experimentally, 33. 

Electrical Energy, Producers of, 
Necessity of Being the Main, 84. 

Electrical Engineers. (See Engi- 
neers and Engineering.) 

Electrical Manufacturers, Thanks 
Due to the, 145. 

Electrical Manufacturing Problems 
of the Early Days, 344. 

Electrical Men, Two, Careers of 
(Company-Section Meeting, 1911), 
241. 

Electrical Securities (Address to 
Investment Bankers, 1913), 427. 

Electrical Trades Association of 
Chicago, 1909 Speech before, 
103. 

Electrical Units of Measurement, 
110, 112, 350. 

Electricity Cannot be Stored Eco- 
nomically, 433. 



Electricity and the Fertility of the 
Soil, 223 (De Ferranti), 231 (Stein- 
metz). 

Electricity Supply. (See Central 
Station, Electric Light, Monopoly, 
Rates, Regulation, etc.) 

Electricity, Universal Application of 
(De Ferranti), 219. 

Electroplating, Invention of (De 
Ferranti), 220. 

Elevators, Influence of, in Office 
Building Demand, 455. 

Empire Builders, 394, 397. 

Employees of Central-Station Com- 
panies, Number of, 191, 407. 

Employees, Personal Responsibility 
of. (See Public Opinion.) 

Employees Urged to Invest in the 
Business, 238. 

Employees Urged to Study Economic 
Questions (Company-Section Meet- 
ing, 1910), 158. 

Employees' Welfare. (See Welfare.) 

Energy, Production and Distribution 
of (Franklin Institute Address 
of 1913), 357. 

Energy Requirements of the Com- 
munity, Supplying the (City Club 
Speech of 1912), 338. 

Energy Supply, Centralization of 
(Y. M. C. A. Speech in New York, 
1914), 445. 

Energy, When, Will be Purchased as 
Energy, 425. 

Engine and Dynamo, Edison's Direct 
Coupling of, 20, 108, 174, 319. 

Engine, Reciprocating, When the, 
Reached Its Limit in Central- 
Station Work, 137, 353. 

Engines of Pearl Street Station, 19, 
319. 

Engineer, Consulting, Self-Interest 
of the, 421. 

Engineer, Prejudice of the, an Ob- 
stacle, 421, 446. 

Engineers, Both Successes and Fail- 
ures Due to, 182. 

Engineers, Electrical, and Stand- 
ardization, 35. 

Engineers, The Great, May be 
Crowned as Empire Builders, 394. 

Engineers, Young, Advice to. (See 
Young Engineers.) 

Engineering, Electrical, Economics 
and, 213. 



484 



INDEX 



Engineering of Fundamental Im- 
portance in Operating Electric- 
Service Properties, 428, 435. 

Engineering, Influence of, on Modern 
Civilization. (University of Illi- 
nois Address, 1913), 392. 

Engineering. (See also Construction 
and Selling.) 

England. (See Great Britain.) 

Enterpriser, Place of the, in Public- 
Utility Work, xviii. 

Entertainment at Company-Section 
Meetings, 191. 

Erickson, Halford, xviii. 

Europe, Electrical Engineers of, 
Work of, 219. 

European Conditions Different from 
American Conditions, 447. 

Exclusive Franchises. (See Monop- 
oly.) 

Experiments in Selling Energy which 
Have Been Criticized, 432. 

Fair Return on Investment, 63. 

Fair Treatment, A Plea for, 475. 

Fan Motors on Central-Station Cir- 
cuits, 101. 

Farmers, Illinois, Electric Service 
for, 359, 361, 363, 377. 

Farming Districts. (See Country 
Districts.) 

Faure, Camille, Storage Battery of, 
110. 

Favoritism, 336. 

Federal Government. (See Con- 
servation and Hydro-Electric.) 

Feeder System, Edison's, 16, 18, 49, 
147. 

Ferguson, Louis A., 316 (n.), 335, 
354. 

Ferranti. (See De Ferranti.) 

Fertility of Land, Electricity and, 
223 (De Ferranti), 231 (Steinmetz). 

Field, Cyrus W., 125. 

Field, Marshall, 336. 

Field, Stephen D., 111. 

Financial Aspects of Chicago Trac- 
tion Ordinances, 76, 120. 

Financial Difficulties of Early Central- 
Station Enterprises, 20, 175, 346, 
349, 

Financial Responsibilities of Utility 
Managers, 406, 423. 

Financing of Railroad Electricity 
Supply, 142, 155, 213, 292. 



Fisher, Walter L., 61, 65. 

Fisk Street Generating Station, 

Chicago, 54 (n.), 113, 136, 137, 

321, 354. 
Fisk Street Station, Some Inside 

History about the Building of, 137, 

354. 

Fixed Charges, Analysis of, 77. 
Fixture, Electric-Lighting, Early, 

318. 
Flats as Central-Station Customers, 

58, 139, 433. 

Forests. (See Conservation.) 
Fowler, Edwin J., 294, 389. 
Fox, William A., 162, 335. 
Franchises Should Insure Protection, 

44, 47. 

Franchises, Value of, 120. 
Franklin, Benjamin, 124, 391 (n.). 
Franklin Institute Address (1913), 

357. 

Franklin Medal, 391 (n.). 
Freeman, W. W., 160, 190, 342. 
Freight-Terminal Expense, Railroad, 

403. 

Freight Traffic and Switching Re- 
quirements, Electrical, 269, 286, 

287, 294. 

Frequency. (See Periodicity.) 
Fuel Economy and Central-Station 

Efficiency, 138, 177, 247, 324, 

401, 411, 469. 

Fuel Expense and Maximum Load, 58. 
Fuel Handling, Central-Station, in 

Chicago, 98, 185, 331. 
Fuel Resources of Great Britain, 

Conservation of (De Ferranti), 180, 

221. 
Fuel Resources of the United States, 

Conservation of, Necessity for the, 

Will Force Massing of Energy 

Production, 424. 

Fuel Statistics, Chicago Central- 
Station, 326, 329, 411, 466. 
Fulton, Robert, 392. 

Galvanometer, Watching the, 346. 

Garages, Public, Electrical Require- 
ments of, 454. 

Gas and Electricity under 1898 Con- 
ditions, 32. 

Gas and Electricity, Relation of, in 
1881, xxvii. 

Gas and Electricity, Relative Rapid- 
ity of Introduction of, 350. 



INDEX 



485 



Gas, Introduction of, 392. 

Gas, Sale of, Annual Income from, 
461. 

Gas Shares, The 1878 and 1879 Panic 
in, 15, 107, 342. 

Gasoline Truck, Advantages of the 
Electric Vehicle over the (Edison), 
251. 

Gear, H. B., 294. 

General Electric Company, Forma- 
tion of, 1 (n.). 

General Electric Company Manu- 
factures 5000-Kilowatt Turbo- 
generator for Fisk Street Station, 
137, 354. 

General Electric Company, Relation 
of Edison Central-Station Com- 
panies with, 2, 6. 

General Electric Company's Boston 
Dinner (1910), Speech at, 127. 

General Electric Company's Lamp 
Testing Bureau, 5. 

Generating Expense and Distributing 
Expense, 202, 211. 

Generating Units, Size of, 69, 137, 
207, 311, 322, 338, 352, 355, 410, 
418. 

Generating Units. (See also Steam 
Turbine and Turbo-generators.) 

Generation of Electrical Energy, 
Economics of. (See Massing of 
Production.) 

Germany, Central-Station Conditions 
in, 136. 

Gilchrist, John F., 236, 335. 

Gilliland, E. T., 106. 

Gladstone, Mrs., Anecdote of, xxvi. 

Good- Will of the Public, Importance 
of the, 122, 156, 179, 204, 356. 

Gouraud, Colonel George E., xxv, 
xxxv (n.). 

Government Ownership. (See Public 
Ownership.) 

Government Paternalism and Wel- 
fare Work, 195. 

Government Policy Relating to 
Water-Power Development. (See 
Conservation and Hydro-electric.) 

Great Britain, Electrical Engineers 
of, Work of, 219. 

Great Britain, Fuel Resources of, 
Conservation of (De Ferranti), 
180, 221. 

Great Britain, Regulation of Utilities 
in, 442. 



Great Britain, Three Hundred 
Central-Stations in, Chicago Elec- 
tric-Service Statistics Compared 
with Those of, 419. 

Group Operation of Electrified Rail- 
road Terminals, 282, 284, 304. 

Group Operation of Utilities in 
Illinois, 471. 

Gulick, John H., 335. 

Hard Knocks, The Discipline of, 236. 

Hard Work Necessary for Achieve- 
ment, 398. 

Harriman, E. H., 398. 

Harrison Street Station, Chicago, 22, 
112, 162, 320, 352, 418. 

Harrison Street Station an Example 
of Obsolescence, 22 (n.), 162, 352, 
418. 

Heating Devices, Electric, on Central- 
Station Circuits, 101. 

Heating Purposes, General, Elec- 
tricity and, 332. 

Henrici Restaurant Speech (About 
1900), 161. 

Heyworth, James O., 182. 

Hill, James J., 398. 

Holding Companies, The Financing 
of, 440. 

Holmes, F. J., 101. 

Home-Rule Regulation, 246, 409, 442. 

Hooker, George E., 64, 70. 

Hopkinson, John, and the Three- 
Wire System, 17, 348. 

Hostility, A Certain, to Public- 
Service Corporations (Commercial 
Club, 1911), 243. 

Hotels, Electrical Requirements of, 
459. 

House of Lords, A Committee Meet- 
ing in, 218. 

Houston, E. J., 107, 393. 

Howell, Wilson S., 5. 

Hudson and Manhattan Railroad 
Company, 259, 262. 

Humdrum of Work, More in the 
Business than, 194, 241. 

Hutchinson, C. T. (Electrification), 
309. 

Hydro-Electric Development and the 
Federal Government, 408. 

Hydro-Electric Development of the 
Future, 402. 

Hydro-Electric Development in New 
England, 415, 423. 



486 



INDEX 



Hydro-Electric Development and Pro- 
duction, Cost of, 201, 339, 404, 
462, 404, 465, 469. 

Ice Making, Electrical Requirements 
for, 369, 452, 457. 

Ice Making. (See also Refrigera- 
tion.) 

Illinois Electric-Service Statistics, 388. 

Illinois, Electrical Possibilities of, 358, 
366, 377, 381, 395, 401, 404, 422, 
426, 464, 471, 473. 

Illinois, Group Operation of Utilities 
in, 471. 

Illinois River Drainage Districts, 
370. 

Illinois, State Public Utilities Com- 
mission of, (340 n.). 

Illinois, State of, Unified Electricity 
Supply in, Possibilities of (Com- 
pany-Section Meeting, 1913), 399. 

Illinois, University of. (See Univer- 
sity.) 

Incandescent Lamp. (See Lamp.) 

Income and Capitalization, Ratio 
between, in Central-Station Busi- 
ness, 127, 197, 437. 

Income, Central-Station, per Capita 
in Great Britain and Chicago, 420. 

Income of Commonwealth Edison 
Company, Proportion of, due to 
Lighting, 417, 428. 

Income per Customer in Chicago, 
437, 448. 

Income, Kilowatt-Hour, in Chicago, 
116, 140, 411, 429, 438, 460, 470. 

Income per Kilowatt-Hour, Reduc- 
tion in, 31, 429, 438, 470. 

Income per Kilowatt-Hour in Various 
Cities, 461, 462. 

Income Per Capita in Chicago, 460, 
468. 

Income, Total, from Sales of Elec- 
tricity by Commonwealth Edison 
Company, 329, 420, 428. 

Industrial Corporations, Correct Po- 
sition of, 207. 

Industrial Problems, Electric-Service 
Industry and, 425. 

Industrial Problems. (See also Socio- 
logical Aspects.) 

Influence of Engineering on Modern 
Civilization (University of Illinois 
Address, 1913), 392. 

Insulated Wire. (See Wire.) 



Insull (Samuel) and Edison (Thomas 

A.), Relations of, xv, xx, xxvi, xxxvi, 

48, 103, 108, 118, 249, 318, 334, 344. 

Insull's (Samuel) Letter of 1881 to 

Mr. Kingsbury, xxxv. 

Interest on Investment the Greatest 
Item in Cost of Electricity, 25, 
40, 246, 332, 409, 410, 434. 

Interborough Rapid Transit Com- 
pany of New York, 143, 262, 263. 

Interest and Depreciation, Impor- 
tance of, 194, 421, 434, 466. 

Interstate Commerce Commission 
and the Railroads, 474. 

Invention of the Three- Wire System, 
347. 

Inventor of the Central-Station In- 
dustry, Edison the, 333. 

Inventors, Electrical, Accomplish- 
ments of, 114, 147, 431. 

Inventors, The Work of, 392, 469. 

Investment Bankers' Association, Ad- 
dress to (1913), 427. 

Investment, Central-Station, Cost per 
Kilowatt of, 132, 364, 365, 382. 

Investment in the Central-Station In- 
dustry, 146, 180, 201, 349, 406, 420. 

Investment in Commonwealth Edison 
Company's Plants (Annual), 435, 
437, 468. 

Investment in Commonwealth Edison 
Company's Plants (Total), 329, 420, 
432, 438, 467. 

Investment per Customer in Chicago, 
437. 

Investment, Fair Return on, 63. 

Investment, Stability of, 443. 

Investments. (See Securities.) 

Iron, Steel and Brass Works, Elec- 
trical Requirements of, 452, 455. 

Isolated Plant, The Day of the, Has 
Passed, 99, 132, 256. 

Jablochkoff Candle, 104, 125, 393. 
Jackson, D. C. (Electrification), 308. 
Jackson, W. B. (Electrification), 313. 
Jobbing Shops versus Manufacturing 

Establishments, 36. 
Johnson, E. H., xxvii, xxxix, 125, 349. 
Jumbo Machine of the Early Eighties, 

19, 319. 
Junior and Prior-Lien Securities, 

427, 434, 440. 
Junk Pile, Need of a, 73. 
Junkersfeld, Peter, 294. 



INDEX 



487 



Kelvin Lord, on Edison's Inventions, 
11, 12, 13. 

Kelvin, Lord, and the Storage Bat- 
tery, 110. 

Keokuk Hydro-Electric Plant, Tak- 
ing Energy from, 471. 

Kingsbury, J. E., xxxv. 

Klingenberg, G., 447 (n.). 

Know All You Can about Your Own 
Business, 457. 

Kohlsaat, H. H., 167. 

Kruesi, John, xxxi, 50, 344. 

Labor and Capital Paid About 
Equally Out of Central-Station 
Earnings, 164. 

Labor Invariably Gets Its Wage, 
244. 

Labor-Saving Character of Electricity 
(De Ferranti), 224. 

Lake County, 111., Electrical Re- 
quirements of, 358, 363, 366. 

Lake, E. N. (Electrification), 315. 

Lamp, Arc, Use of the, 32, 342. 

Lamp, Electric Incandescent, In- 
vention of the, 9, 342. 

Lamp, Incandescent, Efficiency of, 
18, 175, 343, 431. 

Lamp (Incandescent), First, Factory, 
414. 

Lamp, Incandescent, The High-Re- 
sistance, 9. 

Lamp, Paper-Filament (1880), 107. 

Lamp Specifications, 39. 

Lamp, Tantalum, 176, 431. 

Lamp-Testing Bureau, Establish- 
ment of, 5. 

Lamp, Tungsten, 15 (n.), 149, 176, 431. 

Lamps, Edison Incandescent, Early 
Specimens of, 318. 

Lamps, Incandescent, Cost of (1881), 
414. 

Large Business, Getting the, 117, 
130, 352, 421. 

Larger Aspects, The, of Making and 
Selling Electrical Energy (Briar- 
cliff Speech of 1909), 73. 

Lauffen-Frankfort Electrical Trans- 
mission, 112 (n.). 

Law, C. C., 14. 

Lee, W. S. (Electrification), 313. 

Licensee and Manufacturing Com- 
panies, 6. 

Lieb, John W., Jr. (Electrification), 
308. 



Lightning Rods, 124. 

Linemen May be Educated for 
Executive Positions, 190. 

Load Factor of Farming District, 
363, 422. 

Load Factor, Improvement of, the 
Central-Station Problem, 128, 138, 
257, 273, 433, 468. 

Load Factor, Low, Makes Lighting 
Business Alone Undesirable, 418, 
419. 

Load Factor and Per Capita Statistics 
of Various Cities and States, 461, 
462, 463, 464. 

Load Factor, The Question of (Pur- 
due, 1898), 27. 

Load Factors, Daily, of Boston, 
Chicago and New York (Diagrams 
and Tables), 274, 275, 276, 277, 
278, 279, 280, 281. 

Load Factors, Railway and Railroad, 
79, 270, 291, 297. 

Load Factors of Various Classes of 
Commercial Customers, 26, 58, 
81, 268, 368, 369, 453, 454, 455, 
457, 459. 

Load Factors. (See also Diversity 
and Rates.) 

Locomotive, Electric (1912), 330. 

London and Chicago, Electric-Service 
Conditions in, Compared, 162, 
171, 185, 447 (n.). 

London and Chicago, Selling of Elec- 
tricity in, Compared (Byllesby 1911 
Convention Speech), 167. 

London, Deptford Station in, 216. 

London, Electric-Service Income and 
Output in, 462. 

London, Proposed Wholesaling of Elec- 
tricity in, 218. 

London Times, Quotation from, 401. 

Low-Head Hydro-Electric Develop- 
ment, 469. 

Low Rates, Apparently, May Mean 
Good Business, 81, 281. 

Low Rates, Cheap Money and, 245. 

Low Rates of Great Importance, 153, 
426. 

Luepke, Paul, 189 (n.). 

Lundy, A. D., 111. 

Mabbs, J. W., 102. 

McClellan, William (Electrification), 

313. 
McCormick, Robert R., 60. 



488 



INDEX 



McKana, George E., 389. 

Machinery, Electrical, Standard Speci- 
fications for, Recommended, 35. 

Mailloux, C. O. (Electrification), 314. 

Manufacturers, Electrical. (See Elec- 
trical Manufacturers.) 

Manufacturers, Miscellaneous, Elec- 
trical Requirements of, 452, 457. 

Manufacturing, Standardization in, 
36. 

Manufacturing. (See also Electrical.) 

Marconi, William, 113, 393. 

Martin, T. Commerford, xxv, 146. 

Massing of Energy Production an 
Economic Necessity (Boston Speech 
of 1910 at General Electric Com- 
pany's Dinner), 127. 

Massing of Production and Distribu- 
tion, Various References to, 52, 
75, 96, 127, 148, 152, 170, 176, 212, 
239, 253, 275, 292, 311, 321, 335, 
353, 355, 400, 411, 418, 421, 439, 
465, 468, 471. 

Matchless Electric Light, 318. 

Maximum-Demand System of Charg- 
ing, 28, 42, 410. 

Maximum-Demand System. (See also 
Wright System of Rates.) 

Maximum Load in Chicago, Statistics 
of, 24, 57, 162, 177, 185, 253, 321, 
324, 411. 

Maximum Load, Influence of, on 
Rates, 57. 

Maximum Load of Railroads, Time 
of, 210. 

Meat-Packing Industries, Stockyards 
and, Electrical Requirements of 
457. 

Mellen, Charles S., 210. 

Menlo Park, N. J., Early Electrical 
Work in, xxxviii, 48, 107, 108, 317, 
342, 414. 

Merriam, Charles E., 71. 

Merz, C. H., and Others, Dinner in 
Honor of, 215. 

Merz, C. H., Work of, 218. 

Meter, Electric, in 1881, xxxvii. 

Meter, Two-Dial, 28. 

Meter, Wright Demand, 450. 

Metering Devices, Printing-Tape 450. 

Metering on a Lamp-Hour Basis, 350. 

Metropolitan Street Railway Com- 
pany of New York, 85. 

Milan, Italy, Early Central Station 
in, 318. 



Mining. (See Coal.) 

Minneapolis, Electric-Service Income 
and Output in, 462. 

Minneapolis and St. Paul, Cheap 
Power Helped to Develop, 404. 

Mississippi River Hydro-Electric De- 
velopment at Keokuk, Taking En- 
ergy from, 471. 

Mississippi Valley, Electric Service 
in, Prospect of, 336, 380, 396, 474. 

Mitten, T. E., 94. 

Money Making, Pleasures Beyond, 
194, 241. 

Monopoly in the Electric-Light In- 
dustry, Necessity for, Recognized 
(Vanderlip), 227. 

Monopoly, Get a, Sell Your Product 
at a Price Which Will Enable You 
to (Byllesby 1910 Convention 
Speech), 116. 

Monopoly, The Obligations of, Must 
be Accepted (Speech at Byllesby 
1910 Dinner), 118. 

Monopoly the Only Way to Get the 
Results, 184, 445. 

Monopoly in Public-Utility Service, 
Various References to, 45, 60, 67, 
75, 94, 99, 116, 118, 142, 155, 178, 
183, 184, 253, 336, 339, 356, 384, 
399, 409, 417, 442, 445, 447, 464, 
473. 

Morgan, J. Pierpont, 175, 349. 

Morse, S. F. B., and the Telegraph, 
124, 392. 

Mortgage Trust Deeds, 427, 440. 

Morton, Professor Henry, on Sub- 
dividing the Electric Light, 10. 

Motor, Electric, Edison on the Future 
of the, 251. 

Motor Load . (See Non-Lighting Load . ) 

Motors, Electric, Early Realization 
of Advantages of, xxxvii, 48, 343, 
414. 

Multiple-Arc Distribution, 16, 49, 349. 

Municipal Compensation. (See Taxes.) 

Municipal Ownership and Operation. 
(See Public Ownership.) 

Municipality's Right of Purchase, 46. 

Murray, W. S. (Electrification), 299, 
308, 313. 

National Board of Fire Under- 
writers, Co-operation with, 38. 

National Electric Lamp Association, 
414 (n.). 



INDEX 



489 



National Electric Light Association, 
Commonwealth Edison Company 
Section of. (See Commonwealth.) 

National Electric Light Association, 
Company-Section Organization of, 
144, 159, 189, 234, 337. 

National Electric Light Association 
Presidential Address (1898), 34. 

National Electric Light Association, 
Public Policy Committee of. (See 
Public Policy Committee.) 

National Electric Light Association, 
St. Louis (1910) Convention of, 
Address at, 144. 

National Electric Light Association, 
Work of the, Value of the, 158, 
200, 203, 235. 

New England Manufacturing, Re- 
lation of Water-Power to, 396. 
404, 415. 

New England, Per Capita Con- 
sumption of Electricity in, 141. 

New Jersey, Electrical Possibilities 
of, 390. 

New York Central Railroad's New 
York Terminal Electrification, 85, 
90, 101, 143, 209, 263, 264, 273, 310. 

New York City, Annual Income in, 
from Sale of Electricity, 460. 

New York City and Chicago, Load 
Diagrams of, Compared, 280, 281, 
330, 434. 

New York City and Chicago as Power 
Production Centers, 201. 

New York City, Diversity of De- 
mand in, 211, 259, 260, 261, 262, 
263, 274, 275, 292, 423. 

New York City, Duane Street Station 
in, 22. 

New York City, Load Factors in, 
143, 260, 261, 262, 263, 279, 281. 

New York City, Massing of Produc- 
duction in, Proposed, 213, 292. 

New York City, Pearl Street Station 
in. (See Pearl Street.) 

New York City, United Electric Light 
and Power Company of, 261. 

New York City Y. M. C. A. Speech 
(1914), 445. 

New York Edison Company, 82, 85, 
116, 143, 261, 280, 331. 

New York, Edison Electric Illuminat- 
ing Company of, 18, 85, 118, 146. 

New York N. E. L. A. Convention of 
1911, Speeches at, 189, 193, 197. 



New York, New Haven and Hartford 
Railroad, Electrification of, 135, 
153, 263, 291. 

Newspapers. (See Advertising and 
Press.) 

Niagara Falls, Electric-Service In- 
come and Output in, 462. 

Niagara Falls, N. Y., Convention of 
the Edison Association (1897), 
Presidential Address at, 1. 

Niagara Falls, Ont., Convention 
(1911) of Canadian Electrical Asso- 
ciation, 199. 

Niagara Falls Power Development, 
201, 257. 

Nitrogen, Fixed, of Coal, Getting at 
the (De Ferranti), 223. 

Nomenclature. (See Terminology.) 

Non-Lighting Load, Importance of, 
416, 420, 466. 

North Clark Street Station, Chicago, 
320. 

North Shore Electric Company, 111, 
136 (n.). 

Northwest Generating Station, Chi- 
cago, 321. 

Obligations, The, of Monopoly Must 
be Accepted (Byllesby 1910 Din- 
ner), 118. 

Off-Peak Business, Electrical Drain- 
age an, 373. 

Off-Peak Rate, 454. 

Off-Peak Schedule for Electrical Ice 
Making, 369. 

Office Boy, From, to Vice-President, 
235. 

Office Buildings as Central-Station 
Customers, 26, 40, 58, 454. 

One Dollar. (See Dollar.) 

Operating Charges, Analysis of, 77. 

Operating Cost and Interest Cost, 25. 

Operating Expenses of Common- 
wealth Edison Company, 329, 466. 

Opportunity for Advancement (Com- 
pany-Section Meeting, 1911), 234. 

Orton, William, 250. 

Output, Increase of, Rates Decrease 
with, 99, 461. 

Output and Investment, 433. 

Output, Kilowatt-Hour, of Common- 
wealth Edison Company, 74, 116, 
162, 332, 411, 420, 429, 438, 467. 

Overcapitalization, Regulation Will 
Prevent, 442. 



490 



INDEX 



Pacific Coast, Massing of Production 
on, 153, 464. 

Panics and the Electric-Service In- 
dustry, 201. 

Paris Exposition and Electrical Con- 
gress (1881), xxvi (n.), 110. 

Paris Exposition and Electrical Con- 
gress (1889), 112, 350. 

Parker. Lee H. (Electrification), 314. 

Parsons, Hon. Sir Charles A., and the 
Steam Turbine, 353. 

Partrick & Carter, 106. 

Passenger Traffic, Railroad, Electrical 
Requirements of, 269, 288, 300. 

Patent, Electrical-Distribution, Edi- 
son's 1880 Application for, 9. 

Patent Protection for Licensee Com- 
panies, 6. 

Peak Load Conditions Explained, 
57, 433. 

Pearl Street Station in New York 
City, xxx, 15, 17, 109, 147, 174, 319, 
345. 

Pennsylvania, Electrical Possibilities 
of the State of, 389. 

Pennsylvania Railroad's New York 
Terminal Electrification, 92, 101, 
209, 263, 273, 309. 

Pension Fund (Service Annuity) of 
the Commonwealth Edison Com- 
pany, 238. 

Per Capita Statistics of the Sale of 
Electricity and Gas, 420 460, 461, 
462, 463, 464, 468. 

Periodicity, Effect of, Explained in 
City Club Discussion, 70. 

Pessimism, Get Rid of. 173. 

Philadelphia, Annual Income in, from 
Sale of Electricity, 460. 

Philadelphia Company-Section 
Work, 190. 

Philadelphia Public-Service P r o b- 
lems, 388. 

Phonograph, Invention of the, 14. 

Plant Additions in Chicago, Sources 
of Capital for, 435, 468. 

Plant Equipment, Reserves of, in 
Small Illinois Towns, 381. 

Policeman, Friendly, A Sleepy Private 
Secretary and a, 345. 

Political versus Industrial Manage- 
ment, 43, 336. 

Politics, Keep Out of, 122. 

Politics, Utilities Should Not be the 
Football of, 187, 336, 442. 



Polyphase-Current Patents, Tesla's, 

112. 

Porter-Allen Engine, 108. 
Power Business. (See Non-Lighting 

Load.) 

Power Transmission. (See Transmis- 
sion.) 
Present-Day Opportunities Are Very 

Great, 397. 
Press, Attitude of the, toward Public 

Utilities, 244, 475. 
Price, Cost and, of Central-Station 

Electrical Energy in Chicago, 411, 

438, 460, 470. 
Price, Selling, Based on Cost, 39, 170, 

438, 470. 

Pride and Prejudice, 446. 
Print-Shop Rates for Electricity, 433. 
Prior-Lien and Junior Securities, 427, 

434, 440. 
Private Secretary to Edison, xvi, 

xxvii, xxix, xxxix, 48, 318, 345. 
Private Service, Public Life and, 398. 
Production, Cost of, Analysis of the, 

77. 

Production and Distribution of Ener- 
gy (Franklin Institute Address of 

1913), 357. 

Production, Massing of. (See Mass- 
ing-) 
Profit from Massing of Production and 

Distribution, 447. 
Profits, Central-Station, Curve of, 

Proposed (Mabbs), 102. 
Profits, Small Margin of, in Efficient 

Plants, 139. 
Public Attitude toward Industries 

(Vanderlip), 226. 
Public Control of Utilities (N. E. 

L. A. Presidential Address of 1898), 

34, 42, 47. 

Public Life and Private Service, 398. 
Public Opinion, Central-Station Em- 
ployees and, 191, 204, 356. 
Public Ownership and Operation of 

Utilities, 42, 61, 384, 407, 412, 417. 
Public Policy, Broad Questions of 

(Address at Chicago N. E. L. A. 

Convention of 1913), 405. 
Public Policy Committee (N. E. L. 

A.), Work of the, 193, 237, 405. 
Public, Regulation of Utilities by 

the. (See Regulation.) 
Public Service Company of Northern 

Illinois, 111 (n.), 136 (n.). 



INDEX 



491 



Public Service Corporation of New 
Jersey, 259, 262. 

Public-Service Corporations, A Cer- 
tain Hostility to (Commercial 
Club, 1911), 243. 

Public-Service Corporations, Rela- 
tions of the Public to the (Chicago 
Engineers' Club, 1911), 182. 

Public, Taking the, into One's Con- 
fidence, 91 (n.). 

Public-Utility Commissions, Regula- 
tion by, 45, 121, 156, 340 (n.), 408, 
441, 473. 

Public-Utility Commissioner, A Col- 
loquy with a, 94. 

Public-Utility Managers' Financial 
Responsibilities, 406, 423. 

Public-Utility Properties, Appraisal 
of, 197. 

Public Utilities, Importance of, in 
the Life of Chicago, 186, 243. 

Pullman, George M., 336. 

Pumping. (See Drainage and 
Water.) 

Purchase, Municipality's Right of, 46. 

Purdue University Lecture on the 
Development of the Central Sta- 
tion, 8. 

Quadruplex Telegraphy, Edison's 
Invention of, 250. 

Quarries and Brickyards, Electrical 
Requirements of, 451, 459. 

Quarry Street Generating Station, 
Chicago, 321. 

Quarter-Century Central-Station An- 
niversary Celebration in Chicago 
(Company-Section Meeting, 1912), 
316. 

Railroad Electrification, Discussion 
on (American Institute of Electrical 
Engineers), 308. 

Railroad Electrification, Economics 
of. (See Economics.) 

Railroad Electrification, Edison on, 
251. 

Railroad Electrification, How, Will 
Probably be Brought About, 380. 

Railroad Electrification, The Re- 
lation of Central-Station Genera- 
tion to (A. I. E. E. Address, 1912), 
255, 308. 

Railroad Financing. (See Financ- 
ing.) 



Railroad Maximum-Demand Period 
Favorable to Central-Station Op- 
eration, 210. 

Railroad Terminals, Chicago, Pro- 
posed Electrification of, 282, 283, 
284, 285, 286, 294. 

Railroads, Electrification of, Various 
References to, 75, 91, 93, 100, 117, 
133, 142, 154, 181, 208, 251, 258, 
282, 283, 284, 285, 286, 292, 312, 
338, 380, 402, 425, 465. 

Railroads, Producing Energy for, 
Cost of, 90, 209. 

Railroads. (See also Freight, Passen- 
ger, and Suburban.) 

Railway Contracts, Swing Maximum 
in, 90. 

Railway, Electric, Edison, 49, 111, 
330. 

Railway, Electric, Introduction of, 
110, 111. 

Railway, Electric, Statistics, 114. 

Railway Electricity Supply in Chicago, 
Central-Station Output for, 74, 429, 
471. 

Railway Electricity Supply in Chicago, 
Rates for. 60, 65, 66, 67, 79, 89, 
430. 

Railway Load Requirements in 
Northern Illinois, 367. 

Railway and Railroad Load Factors, 
79, 269, 291, 297. 

Rate, Off-Peak. (See Off-Peak.) 

Rate Question (1897), 4. 

Rates Affected by Load Factor, 27, 
79, 129, 139, 150, 351, 418, 434, 450, 
462. 

Rates in Chicago, Voluntary Reduc- 
tion of, 340, 438. 

Rates, Cost System of (N. E. L. A. 
Presidential Address of 1898), 39, 
47. 

Rates Decrease with Increase of 
Output, 99, 140, 430, 438, 462. 

Rates, Electric-Service, Elucidation 
of, for Business Men (City Club 
Discussion of 1908), 54. 

Rates, Flat, 40, 351. 

Rates for Hydro-Electric Energy in 
Rocky Mountain Region and on 
Pacific Coast, 464, 465. 

Rates, Lighting (1912), in Chicago, 
325, 430. 

Rates, Lighting (1913), in Chicago 
and Other American Cities, 432. 



492 



INDEX 



Rates, Low, Apparently, May Mean 
Good Business, 81, 281. 

Rates, Low, Cheap Money and, 245. 

Rates, Low, of Great Importance, 153, 
426, 

Rates, Maximum-Demand. (See 
Maximum-Demand and Wright.) 

Rates for Railway Electricity Supply 
in Chicago. (See Railway Elec- 
tricity Supply in Chicago, Rates 
for.) 

Rates, Residence, in Chicago, 74 (n.), 
139, 432. 

Rates in Review (1910), 149. 

Rates, Stability of, Regulation and, 
442. 

Rates, Wright System of. (See 
Wright.) 

Rates. (See also Income.) 

Rathenau, Dr. Emil, Advice of, 136, 
355. 

Rating of Dynamo-Electric Machines, 
37. 

Reclamation of Swamps, Electricity 
and, 373. 

Refrigeration and Ice-Making Load, 
Influence of, on Load Factor, 268. 

Regulating Bodies May Insist on 
Centralization, 446. 

Regulation of Utilities by the Public 
Advocated, 44, 47, 60, 119, 155, 
178, 188, 246, 340, 399, 408, 441, 
473. 

Relations of the Public to the Public- 
Service Corporations (Chicago En- 
gineers' Club, 1911), 182. 

Reserve Accounts, Necessity for, 436, 
444. 

Reserves of Plant Equipment in Small 
Illinois Towns, 381. 

Residence Customers in Chicago 
(1908-1909), Statistics of, 139. 

Resistances in Series with Feeders 
from Pearl Street Station, 18. 

Responsibilities of Managers of Utility 
Properties, 406, 423. 

Restaurants, All-Night, as Central- 
Station Customers, 27, 433. 

Return, Fair, on Investment, 63. 

Rice, E. W., Jr., 136, 414. 

Roach, John, Edison's Negotiations 
with, 318, 344. 

Rocky Mountain Region, Rates for 
Hydro-Electric Energy in, 464. 

Roentgen, W. C., 113. 



Rotary Converters, Central-Station 
Use of, 23, 321, 353, 418. 

Rotary Converters, First, in Brook- 
lyn, 353. 

Rotary Converters, First, in Chicago, 
321, 353. 

Rural Districts. (See Country Dis- 
tricts.) 

Rural Illinois, Electrical Possibilities 
of, 377, 383. 

St. Joseph River, Hydro-Electric 
Development on the, 403. 

St. Louis N. E. L. A. Convention of 
1910, Address at, 144. 

St. Paul and Minneapolis, Cheap 
Power Helped to Develop, 404. 

San Francisco, Electric-Service In- 
come and Output in, 462. 

San Francisco and Vicinity, Annual 
Income in, from Sale of Electricity, 
460. 

Sanitary District of Chicago, 60, 62, 
340. 

Sargent, Frederick, 241, 335, 354. 

Satisfy Your Customers (Speech at 
Byllesby 1911 Dinner), 174. 

Saturation of the Dollar Invested with 
the Electrical Energy Produced, 
437, 468. 

Saturation, Point of, in Chicago Elec- 
tric Service on 1912 Basis, 330. 

Saving to be Effected by Utilizing 
Diversity of Demand, 134, 292, 
355, 382. 

Savings of Efficiency Go to Customers, 
193 

Savings Fund of the Commonwealth 
Edison Company, 160, 237. 

Schenectady Works, xxxi, 318. 

Schuchardt, R. F., 316 (n.) 

Scrapping of Small Plants, 439. 

Scrapping and Stability of Invest- 
ment, 443. 

Scrapping Uneconomical Machinery, 
73. 

Securities of Edison Companies Desir- 
able Investments, 3, 21, 340. 

Securities of Electric-Service Proper- 
ties, How to Judge, 438, 441. 

Securities, Electrical (Address to 
Investment Bankers, 1913), 427. 

Securities, Electrical, Should Repre- 
sent a Stable Investment (Vander- 
lip), 227. 



INDEX 



Securities, Issuance of, 119. 
Securities, Paper, 441. 
Securities, Watered, 442. 
Securities. (See also Bonds and 

Prior Lien.) 
Self-Reliance, 236. 
Sell Your Product at a Price which 

will Enable You to Get a Monopoly 

(Byllesby 1910 Convention Speech), 

116. 
Selling Electrical Energy, Making 

and, The Larger Aspects of (Briar- 
cliff Speech of 1909), 73. 
Selling Engineering, 428, 432, 434, 

467, 469. 
Selling, Proper Methods of, 150, 351, 

410, 438. 
Service, The Best of, at the Lowest 

Possible Price, 182. 
Service, Continuity of, Importance 

of, 194. 
Service, Electric, What, Means to 

Chicago, 331. 
Shorthand Clerk, The, xxx, 103, 335, 

347. 

Siemens, Werner von, and the Three- 
Wire System, 17, 348. 
Siemens, Werner von, Work of, 104, 

176. 
Siemens, William, on Subdividing the 

Electric Light, 11, 12. 
Siemens & Halske, Early Work of, 22, 

110, 176, 350. 

Single-phase Operation of Three- 
phase Generators, 291. 
Sleepy Private Secretary, A, and a 

Friendly Policeman, 345. 
Small Central-Station Plants, General 

Principles Apply to, 74, 116, 129, 

412. 
Small Communities, Electricity for, 

380, 383, 412, 426, 439. 
Small-Town Generating Stations are 

Bound to Disappear, 439. 
Smith, Byron L., 316. 
Smith, Ernest F., 159. 
Smoke Abatement Commission, 185. 
Socialism, Municipal, Creation of a, 

42. 
Sociological Aspects of Widespread 

Unification of Electricity Supply, 

380, 390, 395, 396, 402, 413, 425, 

474. 
Sockets, Wooden, of the Early Days, 

345. 



Soil, Fertility of the, Electricity and, 
223 (De Ferranti), 231 (Steinmetz). 

Sothman, P. W. (Electrification), 314. 

Specialists in the Manufacture of 
Electrical Energy, 154, 214. 

Sprague, Frank J., Ill, 125 (n.), 393. 

Sprague, Frank J. (Electrification), 
255 (n.), 310, 312, 313, 315. 

Sprague, Frank J., and the Sunbury 
Station (1883), xxxii (n.). 

Square Deal for the Public, A (Van- 
derlip), 228. 

Standard Oil Decision of Supreme 
Court, 244. 

Standardization, Cost System of 
Rates, and Public Control (N. E. 
L. A. Presidential Address of 
1898), 34. 

Steam Engineering, Wretched, of the 
Early Days, 348. 

Steam and Hydro-Electric Produc- 
tion Compared, 201, 404, 462, 465, 
469. 

Steam Turbine and the Economical 
Production of Electrical Energy, 
52, 113, 137, 149, 208, 353. 

Steam Turbine, Original, of Fisk 
Street Station, 321, 354. 

Steam Turbine. (See also Generat- 
ing Units and Turbo-Generators.) 

Steel, Iron and Brass Works, Elec- 
trical Requirements of, 452, 455. 

Steinmetz, Charles P., 474. 

Steinmetz, Charles P. (Electrifica- 
tion), 308. 

Steinmetz, Charles P., Speech of, at 
De Ferranti Dinner, 228. 

Stephenson, George, 392. 

Stepping Stones of Central-Station 
Development through Three Dec- 
ades (Brooklyn Speech of 1912), 342. 

Stillwell, L. B. (Electrification), 309. 

Stockyards and Meat-Packing In- 
dustries, Electrical Requirements 
of, 457. 

Storage Battery (1881), 110. 

Storage Battery, Use of the, in Cen- 
tral Stations, 4, 25, 58, 321. 

Stored, Electricity Cannot be. 
Economically, 433. 

Storer, N. W. (Electrification), 314. 

Stores as Central-Station Customers, 
26, 59, 140, 432. 

Stott, H. G. (Electrification), 312. 

Street Railway. (See Railway.) 



494 



INDEX 



Subdividing the Electric Light, 10, 11, 
48, 107. 

Submarine Cable Tolls (1881), 106. 

Submarine Cables, 125, 393. 

Substations in Electric-Service Sys- 
tems, 51, 148, 176, 212, 321, 400. 

Suburban Railroad Traffic and Elec- 
trification, 264, 289. 

Suburban Railroad Traffic. (See 
also Railroad and Railroads.) 

Sunbury, Pa., Station of 1883, xxxii 

(n.). 

Sunny, B. E., 104. 

Supply Dealers and N. E. L. A. Com- 
pany Sections, 190. 
Supply Dealers, Thanks Due to the, 

145. 
Supply Dealers of Thirty Years 

Ago, 105. 
Supplying the Energy Requirements 

of the Community (City Club 

Speech of 1912), 338. 
Surplus Set Aside Partly from the 

Work of the Selling Engineer, 467. 
Swamp Drainage, Electricity and, 

373. 
Swan and Edison as Inventors, xxxviii, 

11. 
Swing Maximum in Railway and 

Railroad Operation, 90, 291. 
Switches, Enormous, of the Early 

Days, 345. 
Switchboard, Early, in Adams Street 

Station, Chicago, 320. 
Switching, Railroad, Electrical Re- 
quirements of. (See Freight.) 

Tait, Frank M., 406. 
Tantalum Lamp. (See Lamp.) 
Taxes and Municipal Compensation, 

45, 97, 163, 243, 326, 332, 407, 466. 
Taxpayers' Money Should Not be 

Used to Further Economic Waste, 

339, 384, 407. 
Telegraph, Electric. Invention of, 

124, 220 (De Ferranti), 392. 
Telegraph Tolls (1881), 106. 
Telegraphic Inventions of Edison, 

14, 250. 
Telephone Exchanges and Offices, 

Electrical Requirements of, 457. 
Telephone Industry, Statistics of, 

113. 

Telephone, When the, Was a Curios- 
ity, xxv, 104, 125. 



Telephonic Inventions, Edison's, 14, 
105. 

Terminology of the Electrical Art, xxii. 

Tesla, Nikola, 112. 

Thomas, Percy H. (Electrification), 
313. 

Thomson, Elihu, 107, 111, 123, 393. 

Thomson, Elihu, Presentation of the 
Edison Medal to, 123. 

Thomson-Houston Electric Com- 
pany, 1 (n.), 6, 50, 123. 

Thomson, William. (See Kelvin.) 

Three-Wire Generating Stations, 
Early, xxxii, 51. 

Three-Wire System, Edison's, 16, 
111, 148, 347. 

Tillotson & Sons, 106. 

Town Light-and-Power Require- 
ments in Illinois, 366. 

Townley, Calvert (Electrification), 
313. 

Trained Men, The Demand for, 397. 

Transformers, House-to-House, 21. 

Transformers, Improvements in, 418. 

Transmission, Electrical, 23, 112, 
148, 176, 352, 378, 400, 415, 474. 

Transportation, Cheap, and Cheap 
Energy, 339. 

Transportation Facilities and Civil- 
ization, 393. 

Tubes, Edison. (See Edison.) 

Tungsten Lamp. (See Lamp.) 

Turbo-Generators, Large, Develop- 
ment of, 138, 149, 177, 418. 

Turbo-Generators. (See also Gener- 
ating Units and Steam Turbine.) 

Turnover, Annual, in the Central- 
Station Business, 127, 197. 

Twenty-Seventh Street Station, Chi- 
cago, 320. 

Two-Rate System of Charging, 28, 41. 

Underground Cables, De Ferranti's 
Early Work with (Steinmetz), 229. 

Underground Work (1880), 16, 49, 
107, 343. 

Unification of Electricity Supply, 
Widespread, Sociological Aspects of. 
(See Sociological.) 

Unified Electricity Supply in the State 
of Illinois, Possibilities of (Com- 
pany-Section Meeting, 1913), 399. 

Unified Electrification of Railroad 
Terminals Proposed, 282, 283, 284, 
285, 286, 304. 



INDEX 



495 



United Electric Light and Power 
Company of New York, 261. 

United States Census. (See Cen- 
sus.) 

United States Government. (See 
Conservation and Hydro-Electric.) 

United States Steel Corporation's 
Welfare Work, 407. 

Universal Application of Electricity 
(De Ferranti), 219. 

University of Illinois, 1913 Address 
at, 392. 

Utilities. (See Public.) 

Vail, Alfred, and the Telegraph, 124. 
Valleys in the Load Curve, Filling 

the, 433. 
Value of Your Own Concern, Know 

the, 198. 

Vanderlip, Frank A., 95. 
Vanderlip, Frank A., Speech of, at 

De Ferranti Dinner, 226. 
Vehicle Load, Influence of, on Load 

Factor, 268. 
Vehicle TraflSc in Cities, Electricity 

for, Edison on, 251. 
Vehicle. (See also Garages.) 
Villard, Henry, xxxi. 
von Siemens. (See Siemens.) 

Wage Account of Less Importance 
than Interest and Depreciation, 
194. 

Wallace, William, Influence of, on 
Edison's Electrical Inventions, 15. 

Waste, Economic. (See Economic.) 

Waste of Money Avoided by Monop- 
oly, 183, 340, 442. 

Waste of Time by Employees, What, 
Means, 332. 

Watered Securities, Regulation a Pro- 
tection against, 442. 

Water Power. (See Conservation and 
Hydro-Electric.) 

Water Pumping, Electrical Re- 
quirements for, 368. 

Watt, James, 392. 

Welding, Electric, 111. 

Welfare of Employees, 193. 406. 



Welfare Work, The Final Test of 

(New York N. E. L. A. Conven- 
tion of 1911), 193. 
Welsbach Gas Burner, 32. 
Western Edison Light Company of 

Chicago, 177. 
Western Electric Company, xxxv (n.), 

105. 
Westinghouse Electric Company, 50, 

148, 176, 350. 
Westinghouse, George, Work of, 126, 

176, 393. 

Weston, Edward, 393. 
Wheatstone, Sir Charles, and the 

Telegraph, 392. 

Whitney Syndicate of New York, 84. 
Wholesale Customers, Diversity of 

Demand of, 450. 
Wholesaling of Electricity, 52, 59, 

65, 84, 93, 169, 207, 218, 352, 421, 

429, 432, 450. 
Williams, Arthur, 353. 
Winter and Summer Total-Output 

Curves, 56. 
Wire, Insulated, of the Early Days, 

354. 

Wireless Telegraphy, 113, 393. 
Wiring, House, Expense of, 31. 
Wiring, Standardization of, 38. 
Wood, B. F. (Electrification), 309. 
Working Population, Cheap Energy 

and the, 380, 390, 396. 403, 474. 
Wright, Arthur, and Others, Dinner 

in Honor of, 215. 
Wright System of Rates, 41, 217, 351. 

X-Rays, Discovery of, 113. 

Yankees, Unfortunate Result of Asso- 
ciating with, 108. 

Young Engineers, Advice to, 29, 151, 
397. 

Young Men, Advice to, xxi, 29, 151, 
202, 252, 332, 334, 356, 397. 

Y. M. C. A. Speech (1914) in New 
York, 445. 

Zeitgeist, The, and the Central- 
Station Industry, xix. 



PRINTED, WITH THE EMPLOYMENT OF 
CENTRAL-STATION ELECTRICAL ENERGY, 
BY R. R. DONNELLEY & SONS COMPANY 
AT THE LAKESIDE PRESS. CHICAGO, IN 
APRIL, 1915.